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The Law of Corporate Finance: General Principles and EU Law - Volume II: Contracts in General
Table of Contents
5
1 Introduction
9
1.1 Investments, Generic Contracts, Payments
9
1.2 Particular Contract Types
9
1.3 Examples of Topics
10
1.3.1 The “Perfect Contract”
10
1.3.2 Payment Obligations
12
1.3.3 Nexus of Contracts
13
2 Contracts in General: The Legal Framework
14
2.1 Introduction
14
2.2 The Legal Framework: General Remarks
16
2.2.1 Introduction
16
2.2.2 Platforms, Market Practice, Contract Models
16
2.2.3 Governing Law
21
2.2.4 Choice of Legal Background Rules
23
2.3 The Legal Framework: EU Contract Law
23
2.3.1 Introduction
23
2.3.2 The Law Governing the Contract
24
2.3.3 Approximation of Contract Laws
27
2.4 Fixing the Legal Framework
33
2.4.1 Introduction
33
2.4.2 Documentation
34
2.4.3 Choice of Governing Law
36
2.4.3 Limiting the Scope of Substantive Provisions of Law
38
2.5 Choice of Core Commercial Terms
41
2.5.1 Introduction
41
2.5.2 Definition of Performance
43
2.5.3 Price and Payment Obligations
45
2.5.4 Performance, Price, Cost, Risk
46
2.5.5 Economic Efficiency and the Choice of Terms
47
2.5.6 Management of Agency, Loyalty, Non-competition
52
2.5.7 Business Outsourcing
52
3 Management of Legal Risk: General Remarks
53
3.1 Legal Risks
53
3.2 Risks Managed by Legal Means
54
4 Risks that Relate to the Country’s Legal System
55
4.1 Introduction
55
4.2 Laws Not Enforced (Lack of the Rule of Law)
55
4.3 Change of Law
60
4.4 Flexibility of Law
62
4.4.1 General Remarks
62
4.4.2 Community Law
64
4.4.3 Differences Between Member States
68
4.4.4 Mitigation of the Flexibility of Law Risk
72
4.5 Mandatory Provisions
80
5 Risks that Relate to the Statements of the Parties
81
5.1 Introduction
81
5.2 Interpretation of Contracts
82
5.2.1 Introduction
82
5.2.2 Interpretation of What People Say or Do
86
5.2.3 Traditional Canons of Interpretation
88
5.2.4 Real Method of Interpretation
97
5.2.5 Mitigation of Risk
111
5.3 Terms Not Binding
120
5.3.1 Introduction
120
5.3.2 Non-conformity with Mandatory Rules
121
5.3.3 Different Types of Mandatory Rules: Introduction
127
5.3.4 Fraud
128
5.3.5 Unfair Contract Terms Under Community Law
129
5.3.6 Unfair Contract Terms Under Member States’ Laws
136
5.3.7 Mitigation of Risk Caused by Mandatory Rules
143
5.3.8 Particular Remarks on Standard Form Contracts
147
5.3.9 Mitigation of Risk in Other Areas of Law
155
5.4 Binding Terms Not Enforceable
161
5.4.1 Introduction
161
5.4.2 Recognition and Enforcement of Judgments
161
5.4.3 Availability of Specific Performance
161
5.5 Binding Terms Too Rigid
163
5.5.1 Introduction
163
5.5.2 Community Law
164
5.5.3 Member States’ Laws
165
5.5.4 Mitigation of Risk
170
5.5.5 Particular Remarks on Material Adverse Change
177
5.6 Contract Terms Become Binding
185
5.6.1 Introduction
185
5.6.2 Mitigation of Risk
186
6 Management of Counterparty Risk
193
6.1 Introduction
193
6.2 Counterparty Corporate Risk
194
6.2.1 Introduction
194
6.2.2 Community Law and Member States’ Laws
194
6.2.3 Mitigation of Counterparty Corporate Risk
214
6.3 Counterparty Commercial Risk
220
6.3.1 Introduction
220
6.3.2 Community Law and Member States’ Laws
221
6.3.3 Management of Counterparty Commercial Risk
221
7 Management of Information
245
7.1 Introduction
245
7.2 Information Duties
246
7.3 Substance
249
7.3.1 Core Obligations
249
7.3.2 Provisions that Influence Core Obligations
250
7.3.3 Secondary Duties
255
7.4 Separate Information Duties
255
8 Payment Obligations: Introduction
257
8.1 Traditional Payment Obligations
257
8.2 Other Forms of Payment Obligations
258
9 Payment Obligations: Traditional Legal Questions
259
9.1 Introduction
259
9.2 Money, Currency, Governing Law
259
9.3 Principle of Nominalism
261
9.4 Money as Money or a Commodity
262
9.5 Interest
262
9.5.1 Introduction
262
9.5.2 Fixed Rates, Floating Rates, the Eurosystem
262
9.5.3 Contract v Mandatory Law
265
9.6 The Performance of Monetary Obligations
270
9.6.1 Introduction
270
9.6.2 Payment
271
9.6.3 Finality, Conditionality, Revocability, Recourse
274
9.6.4 Set-off
276
9.6.5 Netting
281
10 Generic Forms of Payment Obligations
286
10.1 Introduction
286
10.2 Legally Not Enforceable Cash Flows
286
10.3 Legally Enforceable Payment Obligations
287
11 Management of Counterparty Credit Risk
291
11.1 Introduction
291
11.2 Choice of the Form of Payment Obligations
292
11.3 Choice of the Time of Payment
296
11.4 Transferability
302
11.4.1 Introduction
302
11.4.2 Basic Legal Aspects Relating to Transferability
303
11.5 Enforceability of the Transfer
307
11.5.1 Introduction
307
11.5.2 Assignment of Receivables
309
11.5.3 Transfer of Negotiable Instruments
315
11.6 The Use of Credit Enhancements
316
11.6.1 Introduction
316
11.6.2 Management of Counterparty Commercial Risk
319
11.6.3 Securing Obligations by the Value of Assets
330
11.6.4 Payment Obligations of a Third Party
363
11.7 Hedging
380
11.7.1 Introduction
380
11.7.2 Hedges Linked to the First Transaction
382
11.7.3 Netting, Close-out Netting, Set-off
383
11.7.4 Derivatives
384
11.8 Credit Risk Transfer in General
397
11.8.1 Introduction
397
11.8.2 Incentive Issues: Risk Shedder’s Perspective
400
11.8.3 Incentive Issues: Risk Taker’s Perspective
401
11.8.4 Tranching
404
12 Other Contract Types
407
12.1 Introduction
407
12.2 Multi-Party Contracts
407
12.3 Islamic Finance
413
12.3.1 General Remarks
413
12.3.2 Basic Principles
414
References
418
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