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Module 2: Contract Law Fundamentals
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🎯 Learning Objectives
By the end of this module, you will be able to:
- Identify the essential elements of a valid contract in common law
- Understand key differences between US, UK, and Mexican contract law
- Apply contract terminology in professional contexts
- Analyze the MUR Shipping v. RTI case on force majeure
- Draft basic force majeure notices and understand reasonable endeavours
📖 PART 1: WARM-UP
Get familiar with essential contract law vocabulary
📚 Key Vocabulary - Study These Terms
Match the Terms
Match these terms (1-8) with their definitions (a-h)Click on pairs to match them:
Terms
Definitions
Complete the Sentences
Use words from the vocabulary to complete these sentences- When Company A proposes terms, they make an to Company B.
- If Company B agrees to all the terms, this constitutes .
- In common law, a contract requires — something of value from both sides.
- When a party fails to perform, this is called a of contract.
- The injured party may seek as compensation in court.
- A clause excuses performance when unforeseeable events occur.
- The contract required the parties to use to overcome any obstacles.
- The court will determine the appropriate for the breach.
📖 PART 2: READING - CONTRACT FORMATION
Understand the essential elements of valid contracts
Essential Elements of a Valid Contract
In Anglo-American common law, a valid contract requires four essential elements: offer, acceptance, consideration, and intention to create legal relations. This differs significantly from civil law systems like Mexico's, where validity depends on consentimiento (consent), objeto (object), and causa (cause).
An offer must be clear, definite, and communicated to the offeree. The principle of consensus ad idem (meeting of minds) means both parties must agree on the same terms. Acceptance must mirror the offer exactly—any changes constitute a counter-offer. This is called the "mirror image rule."
Consideration (Spanish: contraprestación) is uniquely important in common law. Each party must provide something of value: money, goods, services, or even a promise to do (or not do) something. The Latin maxim quid pro quo ("something for something") captures this concept. Without consideration, a promise is merely a gift—unenforceable in court.
The key functional difference: In common law, consideration is a requirement for contract validity—no consideration means no enforceable contract. In Mexican law, contraprestación exists in contratos onerosos (contracts for value), but a contract's validity depends on consentimiento, objeto, and causa. A gratuitous contract like a donation (donación) is perfectly valid without contraprestación. This is why the terms are equivalent, but their legal function differs between systems.
When unforeseen events prevent performance, parties may invoke force majeure (vis major in Latin). However, unlike Mexican law where caso fortuito is codified in the Civil Code, common law has no general doctrine of force majeure. Parties must include specific clauses in their contracts.
The recent UK Supreme Court case MUR Shipping BV v. RTI Ltd [2024] clarified that "reasonable endeavours" to overcome force majeure does not require accepting non-contractual performance. The court upheld the principle of pacta sunt servanda—agreements must be kept as written.
Comparative Table: Contract Formation
| Element | 🇺🇸 United States | 🇬🇧 United Kingdom | 🇲🇽 Mexico |
|---|---|---|---|
| Basic requirement | Offer + Acceptance + Consideration | Offer + Acceptance + Consideration | Consentimiento + Objeto + Causa |
| Consideration | ✅ Required for enforceability | ✅ Required for enforceability | ❌ Not required (causa instead) |
| Written form | Statute of Frauds for certain contracts | Similar requirements | More contracts require written form |
| Force majeure | Must be in contract | Must be in contract | Codified in Civil Code (Art. 2111) |
| Good faith | Implied in performance (UCC) | Limited application | Fundamental principle |
True or False
Read each statement and select True or False1. In common law, consideration is optional for contract validity.
2. The "mirror image rule" means acceptance must match the offer exactly.
3. Mexican law requires consideration just like US and UK law.
4. Force majeure is automatically implied in all English law contracts.
5. Pacta sunt servanda means contracts must be performed as agreed.
Reading Comprehension
Choose the best answer for each question1. What are the four essential elements of a valid contract in common law?
2. What is the "mirror image rule"?
3. How does Mexican law differ from common law regarding consideration?
4. Why must force majeure clauses be explicitly included in common law contracts?
Find the Words
Find words or phrases in the text that match these definitions- A Latin phrase meaning "meeting of minds":
- Something given in exchange for something else:
- The Latin term for "agreements must be kept":
- A superior force that prevents contract performance:
- The requirement that acceptance must exactly match the offer:
⚖️ PART 3: THE MUR SHIPPING CASE
Analyzing a landmark force majeure decision
📋 RTI Ltd v. MUR Shipping BV [2024] UKSC 18
Court: UK Supreme Court
Date: May 15, 2024
Parties: MUR Shipping BV (shipowner) v. RTI Ltd (charterer)
Contract type: Contract of affreightment (bauxite, Guinea → Ukraine)
Central issue: Does "reasonable endeavours" require accepting euros instead of dollars?
Holding: NO — Reasonable endeavours does not require accepting non-contractual performance
📖 Case Facts
In June 2016, MUR Shipping BV and RTI Ltd entered into a contract of affreightment for the carriage of bauxite from Guinea to Ukraine. The contract specified that all payments must be made in US dollars.
Everything proceeded smoothly until April 2018. On April 6, 2018, RTI's parent company—United Company Rusal—was placed on the Specially Designated Nationals List by OFAC (Office of Foreign Assets Control). This meant that dollar payments would be subject to restrictions and potential delays.
Four days later, MUR served a force majeure notice, stating they could not continue without receiving payment as contractually agreed. Specifically, Clause 36 of the contract contained a force majeure provision requiring that the event "cannot be overcome by reasonable endeavours."
RTI rejected the force majeure notice. They offered to pay in euros instead of dollars and agreed to cover all currency conversion costs. RTI argued this would cause MUR no financial detriment whatsoever.
But MUR refused. They maintained their contractual right to receive US dollars, not euros. MUR suspended performance under the contract.
⚖️ Legal Journey
- Arbitration Tribunal: Ruled in favor of RTI (MUR should have accepted euros)
- Commercial Court: Allowed MUR's appeal
- Court of Appeal: Sided with RTI again
- Supreme Court: Unanimously ruled in favor of MUR Shipping
🔑 Key Principle
Lord Hamblen stated that reasonable endeavours clauses ensure a causal connection between the force majeure event and non-performance. They do not require accepting performance that differs from what the contract specifies.
The court emphasized that freedom of contract is fundamental to English commercial law. Clear words are needed to give up valuable contractual rights. MUR was entitled to receive dollars, as agreed. They did not have to accept euros, even if it would cause them no loss.
Pacta sunt servanda — the contract terms as written must be honored.
🎧 PART 3: LISTENING
Listen to the audio about the MUR Shipping case
📋 Pre-Listening: Case Context
In 2024, the UK Supreme Court decided **RTI Ltd v. MUR Shipping BV**, a landmark case about force majeure clauses and sanctions. MUR Shipping agreed to transport bauxite from Guinea to Ukraine. When US sanctions made dollar payments difficult, a dispute arose about whether accepting payment in euros was required.
💡 Prediction Questions
Before listening (when audio is available), think about:
- What problems might sanctions cause for international contracts?
- Should a party accept alternative payment if it causes them no loss?
- What does "reasonable endeavours" mean to you?
📢 Note: Audio will be available when the video lesson is uploaded. For now, you can read the transcript below and complete the exercises based on the case information above.
📄 Audio Transcript (Click to expand)
TRACK 2.1 - MUR SHIPPING CASE OVERVIEW
Duration: 4 minutes 30 seconds
NARRATOR: Welcome to Module 2. Today we examine the landmark UK Supreme Court case RTI Limited versus MUR Shipping BV, decided in May 2024. This case clarifies how force majeure clauses work when sanctions interfere with contractual payments.
NARRATOR: In June 2016, MUR Shipping BV and RTI Ltd entered into a contract of affreightment for the carriage of bauxite from Guinea to Ukraine. The contract specified that all payments must be made in US dollars.
Everything proceeded smoothly until April 2018. On April 6, 2018, RTI's parent company—United Company Rusal—was placed on the Specially Designated Nationals List by OFAC, the Office of Foreign Assets Control. This meant that dollar payments would be subject to restrictions and potential delays.
NARRATOR: Four days later, MUR served a force majeure notice, stating they could not continue without receiving payment as contractually agreed. Specifically, Clause 36 of the contract contained a force majeure provision. To qualify as force majeure, an event had to meet several criteria, including that it "cannot be overcome by reasonable endeavours."
NARRATOR: RTI rejected the force majeure notice. They offered to pay in euros instead of dollars and agreed to cover all currency conversion costs. RTI argued this would cause MUR no financial detriment whatsoever.
But MUR refused. They maintained their contractual right to receive US dollars, not euros. MUR suspended performance under the contract.
NARRATOR: RTI commenced arbitration for breach of contract. The central legal question was: does the obligation to use reasonable endeavours require accepting non-contractual performance?
The arbitration tribunal ruled in favor of RTI, saying MUR should have accepted euros. The Commercial Court disagreed and allowed MUR's appeal. Then the Court of Appeal sided with RTI again. Finally, the case reached the UK Supreme Court.
NARRATOR: On May 15, 2024, the Supreme Court delivered a unanimous decision. The court overturned the Court of Appeal and ruled in favor of MUR Shipping. The principle of pacta sunt servanda was central to the decision.
Lord Hamblen, writing for the court, stated that reasonable endeavours clauses ensure a causal connection between the force majeure event and non-performance. They do not require accepting performance that differs from what the contract specifies.
The court emphasized that freedom of contract is fundamental to English commercial law. Clear words are needed to give up valuable contractual rights. MUR was entitled to receive dollars, as agreed. They did not have to accept euros, even if it would cause them no loss.
NARRATOR: This case has major implications for international commerce. Force majeure clauses must be drafted carefully. The terms you write are the terms you must live with—and the terms you can enforce.
Listen and Tick (✓)
Listen to the recording and tick the information you hearTick (✓) the statements you hear in the audio:
Listen Again and Complete
Fill in the missing words from the audio"In June 2016, MUR Shipping BV and RTI Ltd entered into a contract of for the carriage of from Guinea to Ukraine. The contract specified that all payments must be made in US ."
"On April 6, 2018, RTI's parent company was placed on the Designated Nationals List by OFAC. This meant that dollar payments would be subject to and potential delays."
"MUR served a force majeure , stating they could not continue without receiving payment as contractually . RTI rejected this and offered to pay in instead."
"The central legal question was: does the obligation to use endeavours require accepting -contractual performance?"
Match Speakers with Statements
Match each speaker with what they arguedSpeakers:
- A: MUR Shipping's lawyers
- B: RTI's lawyers
- C: The Supreme Court
- D: The Court of Appeal
1. "Reasonable endeavours require accepting payment in euros since there would be no detriment to MUR."
2. "We are entitled to receive payment in US dollars as specified in the contract."
3. "A party cannot be forced to accept non-contractual performance without clear wording."
💼 PART 4: PRACTICAL APPLICATION
Apply your knowledge to real contract documents
📄 Document Analysis: Force Majeure Clause
Read this authentic force majeure clause from the MUR Shipping contract:
36.1 Subject to the terms of this Clause 36, neither Owners nor Charterers shall be liable to the other for loss, damage, delay or failure in performance caused by a Force Majeure Event as hereinafter defined.
36.3 A Force Majeure Event is an event or state of affairs which meets all of the following criteria:
(a) It is outside the immediate control of the Party giving the Force Majeure Notice;
(b) It prevents or delays the loading or discharge of the cargo;
(c) It is caused by one or more of [listed events including sanctions];
(d) It cannot be overcome by reasonable endeavours from the Party affected.
Identify Elements
Answer questions about the force majeure clauseQuestion: What is the significance of criterion (d) "cannot be overcome by reasonable endeavours" for the MUR Shipping case?
Match Latin Terms
Match each Latin term with its English equivalentLatin Terms
English Equivalents
Complete the Force Majeure Notice Template
Draft a force majeure notice based on the MUR Shipping situationComplete this template as if you were MUR Shipping:
Date: April 10, 2018
From: MUR Shipping BV ("Owners")
To: RTI Ltd ("Charterers")
Re: Contract of Affreightment dated
Dear Sirs,
We hereby give notice of a Force Majeure Event pursuant to Clause of the above Contract.
The Force Majeure Event consists of:
This event prevents performance because:
We have been unable to overcome this event by reasonable endeavours because:
Accordingly, our obligations under the Contract are suspended until further notice.
Yours faithfully,
_______________________
For and on behalf of MUR Shipping BV
💡 Hint: Review the case facts and the force majeure clause criteria. Your answers should reference:
- The OFAC sanctions on RTI's parent company
- The restrictions on US dollar payments
- Why MUR cannot accept alternative currency without giving up contractual rights
💬 PART 5: SPEAKING PRACTICE
Practice your oral communication skills
🗣️ Discussion Questions
Practice answering these questions orally:
1. Compare Systems
How does force majeure work differently in Mexican law (caso fortuito) compared to English law?
2. Apply the Case
If you were RTI's lawyer, what arguments would you make to show MUR should have accepted euros?
3. Professional Context
Why is it important for Mexican lawyers working internationally to understand common law contract principles?
🎭 Role-Play Scenario
Situation
You are a Mexican lawyer advising a client who has a contract with a US company. The contract requires payment in US dollars, but new currency restrictions make this difficult.
Your Task
Explain to your client (in English) what the MUR Shipping case means for their situation.
Consider:
- The importance of the exact contract terms (pacta sunt servanda)
- Whether "reasonable endeavours" requires accepting alternatives
- What the client should propose to the US company
- How to draft appropriate force majeure clauses for future contracts
💼 Practice Tip: Record yourself explaining this scenario, then listen to identify areas for improvement in pronunciation, vocabulary use, and legal argumentation.
📧 Written Practice Task
Write a brief email (50-100 words) to jorge_clemente@empirica.mx explaining:
- The main holding of MUR Shipping v. RTI
- How this might apply to a Mexican client's situation
- One practical drafting tip you learned from this case
📝 Email this for feedback! Your instructor will review and provide personalized comments on your legal English writing.
📝 Module Summary
Key Takeaways
- ✅ Common law contracts require offer, acceptance, consideration, and intent
- ✅ Force majeure must be explicitly included in common law contracts
- ✅ "Reasonable endeavours" does not require accepting non-contractual performance
- ✅ Pacta sunt servanda: the contract terms as written control
- ✅ Mexican lawyers must draft force majeure clauses carefully for international contracts
💡 Professional Tip: When reviewing international contracts, always check if force majeure is defined and what "reasonable endeavours" obligations exist.