May 112014
 

Warren Agin’s blog post on the survivability of contracts during bankruptcy prompted me to resurrect this blog post I had written on my law school blog during my semester studying in Germany.

In my French class* yesterday:

Me (reading aloud): “La resolution de contrat, lorsque celui-ci est syn… synal… synallagmatique?”

Teacher (in French): “It’s the same word as in German.”

Me: [sigh]

Actually, the word exists in English too: “synallagmatic.” But it’s not a word I’ve ever encountered before, not even in law school. Although interestingly, Dictionary.com says it means “bilateral” in Louisiana civil law. I suspect, however, that it may mean “bilateral” in a distinctively civil law sense. In the common law system of contracts, when we mean bilateral we say “bilateral,” but then our whole perception of the directional dynamics of a contractual agreement may be significantly different from those in civil law systems.

Take German law, for instance. German contractual law includes the concept of separation. This means that in any transaction involving the transfer of ownership of some good, there are at least three separate agreements bound up in the transaction:

– A contract for the sale of the good
– A contract to transfer the ownership of the good, and
– A contract to transfer ownership of the money used to pay for the good

These agreements may be thought of as three strands twirled into one rope. And, by analogous extension, as we all understand ropes to work, cutting one strand will not necessarily cause the whole rope to be cut. (This separate strand-cutting is known as the principle of abstraction.) In other words, just because one contract fails does not mean the entire deal fails too.

To a common law American, this situation may seem strange. If one of those strands gets broken, how can the rest remain? We generally see each strand as a condition necessary for the contract to retain its overall enforceability. For instance, if the ownership of the bargained-for good has been transferred, but the money has not been paid, how can the party who received the good still keep it? Under American contract law, he couldn’t. But even under German law he likely couldn’t either, although via different legal reasoning than American law.
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