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Choice Of Law Contract Notes

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Supervision 6 Notes (Conflicts) - Contractual Obligations, Ch. 10

CHOICE OF LAW Choice of law
? General form: legal category and connecting factor Why have choice of law?Should not always apply English law as "lex fori" - justifications: a. Possibility of injustice - actions may have been tailored to take account of a foreign law, cannot be made to apply English law b. Safeguard intentions and expectations of the parties c. Possibility of forum shopping ? claimant is allowed to alter chances of winning by selecting a forum which favours him regardless of whether it is the 'correct' forum. Methods to reduce forum shopping: i. Rules on jurisdiction ii. Harmonising substantive law iii. Rules on choice of law

Rome I and Rome IIWithin the EU, uniform choice of law rules now apply in both contract (Rome I) and tort (Rome II)

Step 1: selecting applicable choice of law rules: characterisation

In English law, the methodology of choice of law is based on categorisation.Three stages of categorisation - MacMillan Inc v Bishopsgate Investment Trust plc (No. 3) o Characterise the issue that is before the court
? Is it an issue relating to the interpretation of the contract?
o Identify connecting factor for issue in question
? Contract - main question faced in area is what the appropriate connecting factor is
? Marriage - generally where the marriage took place o Apply connecting factor to identify applicable legal system

Step 2: substance v procedure Need to determine whether issue in question is one of substance or procedure

1 Supervision 6 Notes (Conflicts) - Contractual Obligations, Ch. 10If procedure: governed by lex fori (local law) If substance: governed by applicable law

Step 3: scope of applicable law-

Need to consider scope of applicable law to determine whether the applicable law could sort all the issues in the case Art 10 and Art 12: all matters of the existence and enforcement of contractual obligations are governed by applicable law Art 12(1)(a): questions of interpretation are governed by applicable law Matter of performance: dealt with by lex fori Consequences of breach of contract, assessment of damages
? Art 12(1)(c) o Matter of fact ? procedural law of court to determine o Matter of law ? applicable law determines result Nullity of contract ? matter for applicable law (Art 12(1)(e))

Art 18: applicable law applies to the extent that it contains rules which raise presumptions of law/determine burden of proof in matters of contract. Step 4: Putative proper lawIf the issue relates to the very validity of the contract ? the issues are governed by the "putative" proper law (i.e. law which would govern if the contract was valid)

1) Art 10(1) assumes contract is valid 2) Identifies applicable law using usual rules of Regulation 3) Applies that law to determine whether there is contract Step 5: Consider mandatory rules and public policy Additional mandatory rules and/or public policy rules may override normal choice of law rules to an extent.Public policy: works in a negative sense Mandatory rules: positive; even if everything else governed by German law, but there were mandatory English law rules ? apply regardless of what law has been chosen.

Step 6: Contract or not?
Once you have considered whether the issue in question is a contractual one, need to consider which regime should apply:

2 Supervision 6 Notes (Conflicts) - Contractual Obligations, Ch. 10

Rome Regulation: Contracts entered into after 17 December 2009 Rome Convention: Before 17 December 2009 and after 1 April 1991 Common law rules: Neither of the above

NB: If not expressly stated, then assume contract was made now.

3 Supervision 6 Notes (Conflicts) - Contractual Obligations, Ch. 10


1 - Material Scope and Interpretation

1 - Applies to contracts entered into after 17 December 2009

2 - Art 1(1):-

Contractual obligation o Adopt broad European autonomous approach (Re Bonacina) o Even if not regarded as contractual obligation within English law, doesn't exclude from scope of Regulation
? E.g. gifts and promises = contractual obligations (GL Report), but not so in English law o Likely to be interpreted consistently with the case law on Art 5(1) BIR Civil and commercial matter o Expressed in same manner as BIR, to be interpreted consistently with that Regulation

3 - Exclusions (Arts 1.2 - 1.3)

1. 2.

Revenue, customs or administrative matters (Article 1(1)). Questions involving the status or legal capacity of natural persons (subject to Art 13 which will be discussed in detail in a later lecture).

3. Obligations arising out of family relationships (Article 1(2)(b)).

4. Obligations arising out of matrimonial property regimes (Article 1(2)(c)).

5. Obligations arising under bills of exchange, cheques and promissory notes (Article 1(2) (d)).

6. Arbitration agreements and agreements on choice of court. (Article 1(2)(e)).

7. Questions governed by the law of companies and other bodies corporate or unincorporated. (Article 1(2)(f)) ? governed by company law

8. In relation to contracts of agency, the question whether an agent is able to bind a principal to a third party. (Article 1(2)(g)) ? governed by agency law

9. Constitution of trusts and the relationship between settlers, trustees and beneficiaries (Article 1(2)(h)) ? governed by trusts law

10. Obligations arising out of dealings prior to the conclusion of a contract (Article 1(2)(i)). (1) Excluded because it is now within Rome II regulation

11. Questions of evidence and procedure, without prejudice to Article 18 (Article 1(3)) ?
questions of procedure are always governed by lex fori (local law) Art 2: Universal application - law specified by Regulation applies whether or not it is law of a MS. NB: secondary legislation stipulates that Regulation rules are applicable in case of conflicts between laws of different parts of the UK 4 - Interpretation
? Court of Justice: art 267 TFEU - has jurisdiction to interpret provision of Regulation 5 - Exclusion of renvoi (Art 20)

Supervision 6 Notes (Conflicts) - Contractual Obligations, Ch. 10

E.g. If Russian law is law applicable to a contract, rights and obligations of the parties are to be determined by Russian domestic law, not by reference to the law which would be regarded as the governing law according to Russian choice of law principles. 2 - Determining applicable law

(a) Express choice of law under Rome I Regulation

Article 3 provides: "A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case".
? Objective: looks at intention Clearest example of express choice of law: parties include an express choice of law provision (e.g. this contract shall be governed by English law)

Incorporation of choice of law clause

? Questions can arise as to whether a clause has or has not been incorporated into the contract.
? The law governing the issue will be the law which would govern, if the contract Wording was approved by one party Court: no evidence to support case with choice of Kansas law and then of custom - in contract law, customs or term sent to the other party who didn't is so clear that everyone knows what was object to the provision and therefore the convention is. No discussion as valid.English law

there was an express choice for Kansas law.

to whether they were applying English contract law or Kansas contract law. It was just obvious that silence could not count as an offer.

usually applied
? Under English law, general words of incorporation do not incorporate choice of law and jurisdiction agreements, something more precise is needed as evidence of parties' intentions (Dornoch Ltd v Mauritious Union Assurance Company)
? Where English law is putative law, normal contractual principles of offer and counter-offer apply.The Lincoln National Life Insurance Co v Employers Reinsurance CorpIran Continental Shelf Oil Company v IRI International Corp: if contract has been concluded by reference to one of the parties' general conditions, Art 3 is satisfied.
- As long as: there is consensus that contract is concluded on these contractual terms Samcrete Egypt Engineers v Land Rover Experts: choice of law in printed contract doesn't satisfy Art 3 if one of the parties deletes clause before singing contract and other parti signs contract without noticing deletionExpress choice by reference
? Could be made by reference to some external factor - e.g. place of business of one of the parties o Companie Tunisienne v Companie D'Armement

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