The Law of Corporate Finance: General Principles and EU Law (eBook)

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