A contract is concluded when the parties agree: one party makes an offer, the other accepts it, and both intend to be bound. This principle applies in every legal system, whether the contract is a purchase in a shop, a software licence or a supply agreement between companies in two countries. The Swiss Code of Obligations (CO)states it in its very first article: the conclusion of a contract requires the mutual expression of the parties’ intention (Art. 1 CO). This expression may be express or implied: a contract can also be concluded by conduct, for example when you take a newspaper from the stand at a kiosk and put it on the counter. «Mutual» means that a contract needs at least two parties (bilateral); contracts with three or more parties are called multilateral. The intentions of the parties must match: in simple terms, the parties must agree on their rights and obligations («nothing is agreed until everything is agreed»). Other legal systems, in particular common law systems, add further requirements, above all the «consideration» (see below); how your own country handles the conclusion of contracts is a question for the chatbot at the end of this chapter.
Offer and acceptance
In practice, a contract is concluded by one party making an offer of goods or services and the other party accepting it (acceptance). How long an offer remains valid depends on how long the other party objectively needs to examine it and to respond (principle of good faith); the more complex the subject matter, the longer this period (Art. 4 ff. CO). It is therefore highly advisable to set a time limit on offers: then it is clear by when the other party must accept, whereas open-ended offers regularly lead to discussions and often to disputes. Under Swiss law, an offer with a time limit is binding until the time limit expires (Art. 3 CO). This can be a problem for the supplier if conditions change in the meantime, for example its own purchase prices, especially with long periods. The solution is a reservation of revocation, for instance: «This offer is valid until [date]. We expressly reserve the right to revoke it.» Alternatively, the offer can be made subject to specific circumstances, for instance: «Prices are subject to change if our purchase prices, exchange rates or transport costs change before acceptance.» It is also possible to make a non-binding offer (Art. 7 CO).
Online offers: Under Swiss law, a product presented in an online shop is a binding offer if it can be delivered immediately, for example software, music or e-books for download; if the goods must be shipped or the service is rendered offline, the presentation is not binding, and it is the customer’s order that constitutes the (binding) offer, which the shop accepts by confirming it (Art. 7 CO). Other legal systems answer these questions differently: whether a website or a display of goods is an offer or merely an invitation to make an offer, and whether an offer with a time limit can still be revoked before acceptance. Whoever trades across borders should check the rules of the country concerned (see the box at the end of this chapter).
«Consideration» in common law systems
In common law systems, the courts require, in addition to offer and acceptance, a so-called «consideration» for a contract to be enforceable. Consideration is the requirement of a counter-performance: each party must give or promise something in exchange for the promise of the other. In a contract of sale, the seller hands over the goods, and the consideration is the payment of the purchase price by the buyer. In everyday business, consideration is rarely a problem, because there is always an exchange. It matters in three situations: a promise without anything in return (a gift, a favour), a one-sided change of a contract (more money for the same performance), and an option (keeping an offer open). In such cases, common law systems may treat the promise as not binding, whereas under Swiss law a promise is binding as soon as the parties agree (Art. 1 CO), even without counter-performance; only a promise to make a gift must be made in writing (Art. 243 CO). How exactly your country applies the rule is a question for the chatbot.
Use of the terms «contract» and «agreement»
The terms «contract» and «agreement» are synonymous: both describe a contract. In practice, «contract» is used rather for formal, comprehensive agreements and «agreement» rather for simpler, shorter ones, but nothing depends on the choice of word. For contracts between states, the terms «treaty» and «convention» are used (e.g. the ILO Conventions on international labour standards, see Chapter 04); these terms are never used in private law relationships. Documents that record the state of negotiations without yet binding the parties, such as a letter of intent or a memorandum of understanding, are dealt with in Chapter 03.10.
Exercise: where is the contract?
Rigi Roasters GmbH, Luzern, chats with Ms Rana, who runs a café in your country.
Task: Decide for yourself: at which message, if any, is a contract concluded, and on which terms? Then ask a chatbot of your choice (Claude, ChatGPT & Co.) the same question, first under Swiss law, then under the law of your country, and compare its reasoning with yours.
In class: we go through the chat message by message and discuss where the contract is, and on which terms.