Conflict rules: see Ch. Ipl conflict rules: see Ch. Ipl



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Conflict rules: see Ch. 3 IPL

  • Conflict rules: see Ch. 3 IPL

  • Most national legal systems have no specific rules for cross-border transactions or international contracts in general (see Ch. 3 IPL)

  • Uniform international law (by international instruments) ?

  • In the EU some harmonisation of general contract law. Esp. Consumer law, but some rules for business contracts, eg Late Payment Directive

  • International conventions on specific types of contracts (sales, carriage or transport, factoring, …)

  • OHADA Uniform Acts (on commercial contracts) and draft general contract law 2004

  • Soft law and model laws, next slide

  • Multinational enterprises: sometimes conclude contracts « under international law » (with states or IO’s) instead of under national law. See e.g. investment contracts.


Obligations arising out of other instruments, but relevant for contract law:

  • Obligations arising out of other instruments, but relevant for contract law:

  • National mandatory law

  • Mandatory rules from international treaties (including also safety regulations and other duties of care ...)

  • International soft law, eg Principles on business and human rights

  • Administrative law in case of contracts with public authorities (such as concessions of infrastructure)



« soft law » and model laws on general contract law

  • « soft law » and model laws on general contract law

  • Possible optional instruments* : Unidroit « Principles », PECL (Lando-commission). Conflict rule will determine whether accepted as « law » or merely as contract clauses

  • Other restatements in contract law in general: Draft Common Frame of reference (DCFR)

  • Model laws on specific questions, e.g. Uncitral model law electronic commerce.

  • *Examples of existing optional instruments: CISG (opt-out), European trademark, societas europea, international last will, european procedures.

  • * On Oct 11, 2011, the EU Commission published a Draft optional sales law (« CESL »), withdrawn later



Unidroit Principles for International Commercial contracts

  • Unidroit Principles for International Commercial contracts

  • « Principles », i.e. no Convention or Model Law

  • First edition 1994 (120 art.)

  • Enlarged edition 2004 (185 art.)

  • Further enlarged 2010/2011 (211 art.) (Endorsed by Uncitral)

  • Enlarged 2016/2017

  • Intended scope of application: international commercial contracts

  • Regulated matters: Formation (incl. Representation), Validity (defects of consent, specific clauses), Interpretation, « Contents », Performance Non-performance and remedies, Set-off, Contractual Assignment of rights and contracts, Transfer of obligations, Limitations of Actions (Prescription)

  • Additional chapters 2010/2011: conditional obligations, illegality, plurality of debtors or creditors, unwinding of failed contracts (restitution)

  • Not covered: non-contractual assignment



Preamble: Purpose of the Principles

  • Preamble: Purpose of the Principles

  • These Principles set forth general rules for international commercial contracts.

  • They shall be applied when the parties have agreed that their contract be governed by them.

  • They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like.

  • They may be applied when the parties have not chosen any law to govern their contract.

  • They may be used to interpret or supplement international uniform law instruments.

  • They may be used to interpret or supplement domestic law.

  • They may serve as a model for national and international legislators.

  • See also 1.4. : applicable insofar as the conflict rule allows it



Art. 1. 6 (Comp. 7 CISG) – Autonomous (& teleological) interpretation

  • Art. 1. 6 (Comp. 7 CISG) – Autonomous (& teleological) interpretation

  • (Interpretation and supplementation of the Principles)

  • (1) In the interpretation of these Principles, regard is to be had to their international character and to their purposes including the need to promote uniformity in their application.

  • (2) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles.

  • But also duty to act in good faith: Art. 1.7 (Good faith and fair dealing)

  • (1) Each party must act in accordance with good faith and fair dealing in international trade.

  • (2) The parties may not exclude or limit this duty.

  • And art. 1.9 Usages and practices (comp. 9 CISG)



Art. 1.1: Freedom of contract

  • Art. 1.1: Freedom of contract

  • Art. 1.2: No form required (unless ...)

  • Art. 1.3: Binding character of contract

  • Art. 1.7: Duty to act according to good faith & fair dealing

  • How intention is determined – interpretation of acts: Art. 4.1 and 4.2

  • (4.1. for contracts, 4.2 for unilateral acts) – Quid merger clause (2.1.17) – No oral modification clause (2.1.18)

  • Usages and practices – Art. 1.9

  • Rules on notices in 1.10

  • In the EU: freedom of contract limited by non-discrimination rules, i.a.

  • Directive 2000/43/EC prohibits discrimination based on racial or ethnic origin in access to goods and services.

  • Special rules on Public procurement (equal treatment & competition)



Uncitral model law 1996 (1998) deals i.a. with:

  • Uncitral model law 1996 (1998) deals i.a. with:

  • - « Data messages » cover EDI, e-mail, telegram, telex and telecopy

  • - Art. 5: Information shall not be denied legal effect merely because it is in the form of a data message

  • - Art. 6: Writing < accessible so as to be usable for subsequent reference

  • - Art. 7: Signature

  • - Art. 8: Whether a data message can be an « original »

  • - Art. 13: Attribution of data messages (who is the sender)

  • - Art. 15: Time of (1) dispatch and (2) of receipt

  • CISG Advisory Council Opinion No. 1 on e-communication under CISG

  • UN Convention on the Use of Electronic Communications in International Contracts 2005 (in force but only 9 ratifications, i.a. Russia)

  • EU: next slide



EU Reg. 910/2014 regulating ‘electronic identification schemes’ (« eIDAS Regulation ») regulates certain types of « trusted services », namely

  • EU Reg. 910/2014 regulating ‘electronic identification schemes’ (« eIDAS Regulation ») regulates certain types of « trusted services », namely

  • electronic signatures (before already harmonised by EU Directive 1999/93 replaced by the eIDAS regulation): different degrees of e-signature: simple, avanced, qualified. Qualified signature has the same legal effects as a traditional signature

  • electronic seals

  • electronic timestamps

  • electronic regsitered delivery services

  • website authentication

  • and the certificates required for such services.

  • (not covering i;a. virtual currencies)

  • EU Directive 2000/31, framework directive e-commerce

  • - Art. 9 Treatment of contracts: equivalence of e-contracts (some exceptions)

  • - Rules relating to information duties, conclusion contract, receipt, ...



Very similar to CISG

  • Very similar to CISG

  • 2.1.1.: conclusion of the contract by offer and acceptance or by conduct of the parties that is sufficient to show agreement

  • Rules on offer and acceptance similar to CISG

  • Art. 2.1.12 (Writings in confirmation)

  • Art. 2.1.14 (Contract with terms deliberately left open)

  • Art. 2.1.17 and 2.1.18 on merger clauses and clauses on modification in a particular form.

  • Going beyond CISG: Art. 2.1.15 on liability for negotiations (or breaking off) in bad faith; 2.1.16 Duty of confidentiality

  • NB. For rules on precontractual stage, see Ch. 1.



Incorporation of standard terms: not for surprising terms (2.1.20)

  • Incorporation of standard terms: not for surprising terms (2.1.20)

  • (« red hand rule », expression from Denning in 1877 judgment Spurling / Bradshaw)

  • Specific rule for battle of forms (2.1.22, knock out) (NB. comparative law: usually knock out; Engl = last shot; NL = first shot: art. 6:225 CC)



Not in CISG , inspired by Unidroit Convention (1983, not in force)

  • Not in CISG , inspired by Unidroit Convention (1983, not in force)

  • Deals with « authority », i.e. external relationship

  • Not internal relationship (eg. agency contract) (2.2.1)

  • Authority by grant (express or implied) (2.2.2); authority based on belief caused by the principal (2.2.5 (b))

  • Direct relationship in case of disclosed agency (2.2.3)

  • In principle no direct relationship in case of undisclosed agency (2.2.4)

  • Liability if the agent acts outside authority: positive interest (2.2.6)

  • Art. 2.2.7 on conflicts of interest

  • Art. 2.2.9 on ratification

  • Art. 2.2.10 on effect of internal termination of autority



Not in CISG

  • Not in CISG

  • Ch. 3.2. Deals with defects of consent giving rise to a right to avoid the contract (4 grounds) (next slide)

  • « Negative reflex effect » of rules on non-performance in Art. 3.2.4.

  • Esp. important for sales (CISG rules on non-performance not displaced by UPICC rules on e.g. mistake)



The 4 defects of consent (cont.):

  • The 4 defects of consent (cont.):

  • (1) Mistake (3.2.2.): 4 cases of mistake (shared, caused, left in error, contract not yet relied upon) + requirement of material difference, no gross negligence, risk not assumed or to be bourne

  • Caused = normally by giving information (« representations »*) turning out to be incorrect

  • * Often a contract will contain explicit representations warranted by a party.

  • Error in expression or transmission: treated as mistake of the sender (3.2.3)

  • (2) Fraud (3.2.5.) fraudulent representation or non-disclosure

  • (3) Threats (3.2.6)

  • (4) Gross disparity or excessive advantage (with abuse of circumstances) (3.2.7)



Deals with defects of consent (cont.):

  • Deals with defects of consent (cont.):

  • General rules on « avoidance » and its effects (in CISG avoidance means termination; here avoidance means annullment)

  • Attribution of acts or omissions to third parties (3.2.8)

  • Exercise of the right:

    • by notice to the other party (3.2.11)
    • within a reasonable period (3.2.12),
    • not anymore after confirmation (3.2.9)
  • Effect = retroactive (3.2.14)

  • Avoidance gives rise to a right to restitution (a non-contractual obligation) (3.2.15)

  • Possibly damages for precontractual liability (3.2.16)



Ch.3.3. deals with « illegality », or rather with the effect of mandatory rules outside the PICC not specifying their effect on the contract

  • Ch.3.3. deals with « illegality », or rather with the effect of mandatory rules outside the PICC not specifying their effect on the contract

  • Eg contract caused by corruption: in principle voidability (3.3.1. UPICC)

  • Rules on restitution in case of violation of mandatory rules in art. 3.3.2.

  • NB. Conflicts may arise between contradictory mandatory rules of countries, e.g.:

  • - (Anti-)Boycott: Arab league boycotts Israel and blacklists companies doing business with Israel; USA prohibits companies to take part in boycott or more generally discriminate on the basis of race, national origin etc. (see US Export Administration Act, EAA & Tax Reform Act).



Ch. 5 contains various rules

  • Ch. 5 contains various rules

  • Under interpretation: supplying an omitted term (Art. 4.8) where important for the determination of their rights and duties

  • Art. 5.1.2: implied obligations stem from (a) the nature and purpose of the contract; (b) practices established between the parties and usages; (c) good faith and fair dealing; (d) reasonableness.

  • Art. 5.1.3. Duty to co-operate with each other

  • Art. 5.1.4. Distinction duty result / merely best efforts

  • Art. 5.1.7. Price determination mechanisms: normal price; unilateral unless manifestly unreasonable; third party decision: exernal factor ceasing to exist

  • Art. 5.1.8. Contract for an indefinite period: ending by notice with reasonable time

  • Art. 5.3.1 ff.: rules on conditional obligations



Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences

  • Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences



Main obligations will depend on the type of contract (sale, service contract, …)

  • Main obligations will depend on the type of contract (sale, service contract, …)

  • Non-specific additional obligations and other clauses:« Boilerplate clauses » (see also Ch. 3 IPL)*, eg

    • «no material adverse change »;
    • « indemnity » (from and against third party claims);
    • waiver of copyright;
    • waiver of privacy (use of personal data);
    • confidentiality clauses (NB not valid in case of corruption);
    • non-disparagement clauses
  • Reaction in national law, esp. consumer law (many clauses will be unfair in at least consumer contracts); YODA (you own your device Act), Consumer Fairness Act, etc.

  • Non-competition clauses: see limits under competition law

  • * Some boilerplate clauses are discussed separately: entire agreement clause (merger clause), no waiver clause, no oral amendment, severability or divisibility clause, clauses on notices, hardship and force majeure, clause specifying essential terms or fundamental breaches, sole remedy clause, clause shortening prescription or limitation



Related contracts:

  • Related contracts:

  • some rules ‘link’ contracts to protect consumer or small business, whereby termination of one contract entails termination of linked contracts (eg consumer credit; French Loi-Macron 2015)



Shift from product standards to process standards imposed upon esp. Suppliers

  • Shift from product standards to process standards imposed upon esp. Suppliers

  • Found in Suppliers Codes or Vendors Codes

  • Clauses related to the responsibility that buyer/client may incur in its home country due to behaviour of the supplier (liability mentioned in Ch. 1) or at least to protect the reputation of the buyer/client:

    • Eg sustainability clauses imposed on supplier (to protect against unethical behaviour of suppliers) (esp. because certain efforts may be required by law, see Ch .1 e.g. UK Modern Slavery Act 2015)
    • Incl. clauses against trafficking and slavery stipulated by client/buyer
    • Anti-corruption clauses (ICC model anti-corruption clause 2012) or more generally compliance clauses; they may also give the client rights to inspect the supplier (right-to-audit-clause); may include also a ‘source-of-funds-clause ’.
    • Clauses concerning respect for social and environmental standards.
  • including requirements for subcontractors (required to abide by the same codes)

  • These Codes may/will contain monitoring / auditing either by the client or by a third party organisation. Contractors may be required to obtain certificates of compliance with such standards (incl. ISO Standards)



Important instruments for international service contracts ?

  • Important instruments for international service contracts ?

  • - international conventions and standard contracts for financial services, see Ch. 9 Financing and Ch. 10. Payments

  • - standard contracts for international construction services, see esp. the FIDIC conditions: « red book » for construction contracts, « yellow book » for building and designing electrical or mechanical plants, « silver book » for process or power plants turnkey projects, « green book » for simple contracts

  • - model general rules for service contracts in the DCFR Book IV (supplemented by specific rules for construction, processing, storage, design, information/advice and treatment contracts)

  • - supra EU law on ‘services of the information society’ (e-commerce Directive 2000/31)

  • - Uncitral legislative guide for concessions (privately financed public infrastructure projects)

  • Services can be part of distribution contracts (see Ch. 6 Distribution) or technology transfer (Ch. 7)



Important instruments for international service contracts ?

  • Important instruments for international service contracts ?

  • International conventions concerning international transport (maritime, road, air, rail, liability of terminal operators, ….)

  • Duties of carriers also determined by other conventions, for carriage over sea especially the IMO Conventions:

  • - e.g. the SOLAS Convention (International Convention for the Safety of Life at Sea, 1974), specified in additional Codes (such as the International Maritime Solid Bulk Cargoes Code (IMSBC Code 2008), the International Code for the Safe Carriage of Grain in Bulk (1991), the International Code for the Construction and Equipment of Ships carrying Dangerous Chemicals in Bulk (IBC Code), the Code of Practice for the Safe Loading and Unloading of Bulk Carriers (BLU Code), …)



Modalities of (performance) of the obligation:

  • Modalities of (performance) of the obligation:

  • Time of performance (Art. 6.1.1.)

  • Order of performance (Art. 6.1.4.) in principle simultaneously

  • Place of performance (Art. 6.1.6) default rules

  • - Monetary obligation: creditor’s place (« obligee »)

  • - Other obligations: debtor’s place (« obligor »)

  • Monetary obligations: means of payment, currency etc. (6.1.7 ff.). See Topic 10 (International Payments)

  • Costs of performance (Art. 6.1.11)

  • Rules where public permission required for performance (6.1.14 ff)

  • Hardship (change of circumstances) Art. 6.2.1 ff. including possible duty to renegotiate (NB. Renegotiation clause in contracts with public authorities may be void because contrary to procurement law)

  • Performance as extinction of an obligation

  • Art. 6.1.12-13: imputation of performance



Overview of remedies for non-performance:

  • Overview of remedies for non-performance:

  • Withholding performance (suspension)

  • Specific performance

  • Termination (called « avoidance » in CISG) and price reduction

  • Damages

  • General principles:

  • Free choice, no hierarchy of remedies (« pari passu ») (but sometimes fundamental breach required)

  • Combinability, esp. of damages and other remedies

  • Largely self-help (unilateral declaration)

  • By notification (usually within a reasonable time)

  • Instruments for restraining termination as a remedy:

      • Additional period for performance (Art. 7.1.5)
      • The seller’s right to cure (Art. 7.1.4)


« Non-performance » of an obligation as general (unitary) concept) (Art. 7.1.1, shift from «(breach of) contract » to « obligation »)

  • « Non-performance » of an obligation as general (unitary) concept) (Art. 7.1.1, shift from «(breach of) contract » to « obligation »)

  • In view of the available remedies, distinction between:

  • - non-performance caused by the creditor itself (7.1.2): no remedy

  • - non-performance excused under 7.1.7 (force majeure): only withholding performance, termination and interest on money due

  • - non-performance cured without delay (7.1.4): only withholding performance, damages

  • - non-performance not excused: all remedies

  • Force majaure = default exception. Can be broadened by hersahip clauses, market adverse condition clauses, etc…, or be restricted by “Hell or High Wate Clauses” (no force majeure exception) (and to same extent by clauses such as take-or-pay-clauses)



  • Rule on exemption clauses: only if not grossly unfair (7.1.6)

  • Some specific types of exemption clauses: knock-for-knock-agreements bewteen the parties (where every party insures itself with a first party insurance) or between their insurers



  • Right to (enforce) (specific) performance

  • - always for monetary obligations (7.2.1) (no exception for cases where you can sell it elsewhere)

  • - in principle for other obligations (7.2.2) unless:

  • - impossible or unlawful

  • - unreasonably burdensome

  • - reasonably available elsewhere

  • - strictly personal character

  • - not requested within a reasonable time



Withholding performance (7.1.3.)

  • Withholding performance (7.1.3.)

  • (the rule on anticipatory breach as in CISG is missing) (but implied in 7.3.3/7.3.4)



Grounds for termination:

  • Grounds for termination:

  • - fundamental non-performance (7.3.1. (1) (2))

  • - after an additional period granted for performance (Nachfrist, 7.1.5. and 7.3.1 (3))

  • - in case of anticipatory fundamental non-performance: 7.3.3. and 7.3.4.

  • Mode of termination (7.3.2):

  • - by notice

  • - in case of late or defective performance: within a reasonable time



Scope of termination: all obligations, unless extended over time and divisible (7.3.6 (2))

  • Scope of termination: all obligations, unless extended over time and divisible (7.3.6 (2))

  • ? Price reduction

  • Effects of termination:

  • - release from (outstanding) obligations (7.3.5 (1))

  • - restitution of performances (in kind or in money) (7.3.6. (1))

  • - surviving clauses (7.3.5 (3))

  • - damages reserved (7.3.5 (2))



Except where non-performance is excused (7.4.1.)

  • Except where non-performance is excused (7.4.1.)

  • General measure of damage:

  • - positive interest (see 7.4.2 (1), incl. lost profit)

  • - includes non-pecuniary loss (7.4.2. (2))

  • - includes loss of a chance (7.4.3.)

  • - limited by foreseeability test (7.4.4)

  • - restriction where due to creditor or non-mitigation of harm by creditor (7.4.7, 7.4.8)

  • - includes costs of mitigation (7.4.8 (2))



Calculation of damage:

  • Calculation of damage:

  • late payment: interest (plus further damage) (Art. 7.4.9); interest rate in 7.4.9 (2, place of payment); dies interpellat pro homine (7.4.10)

  • reasonable substitute transaction: price difference (plus further damage) (Art. 7.4.5)

  • current price (Art. 7.4.6)

  • Agreed payment for non-performance: clauses binding unless grossly excessive in relation to actual harm (7.4.13)

  • (compare Council of Europe Resolution 1978(3) on penal clauses in civil law; UNCITRAL Uniform Rules on contract clauses for an agreed sum due upon failure of performance 1983)

  • NB. An ‘indemnity’ is an autonomous obligation to pay an amount (not as compensation for non-performance of another obligation)



Requirements:

  • Requirements:

  • Obligations of the same kind between 2 parties – incl. monetary debts in different but freely convertible currencies (8.2.)

  • Different models in national laws: either automatic if stricter conditions are met, or by unilateral declaration. Unidroit Principles chooses last model.

  • > Can be set-off by notice (8.3.) by one party where:

  • - its own obligation (« active obligation ») is payable (entitled to perform) (8.1.(1)a)

  • - the obligation of the other party (« passive obligation ») is:

  • (a) due (8.1.(1)b) and

  • (b) ascertained or arising from the same contract ((8.1.(1) b and (2))

  • In UPICC no « retroactive » effect (8.5 (3)) (but in some cases a partly similar rule, cfr. set-off & prescription; set-off & assignment)

  • UPICC does not deal with contractual set-off (netting) but does not exclude it



Assignment = transfer of a right (property)

  • Assignment = transfer of a right (property)

  • Scope of Ch. 9.1:

  • - contractual assignment of contractual rights

  • - not: rights embodied in a negotiable instrument (9.1.2.)

  • Limits to assignability

  • - where significantly more burdensome (9.1.3.)

  • - partially assignable ? If divisible (9.1.4)

  • - no-assignment clauses have NO effect (1) for rights to payment of money and (2) in case of good faith of assignee (9.1.9)

  • - UPICC have no rule as the lex Anastasiana (right of the debtor to buy the claim against the price paid by the assignee); there may be overriding mandatory rules as e.g. the Belgian Act of July 12, 2015 against vulture funds (assignee’s right against debtor State limited to what he paid himself)



Requirements for assignment:

  • Requirements for assignment:

  • - existence of the right ? For future rights assignment takes place with retroactive effect as soon as the right comes into existence (9.1.6)

  • - mere agreement assignor / assignee (neither notice nor consent required for the transfer as such) (9.1.7)

  • Duty to perform of the debtor:

  • - according to (order of) notice (9.1.10 and 9.1.11)

  • - the debtor may demand from the assignee adequate proof of assignment (9.1.12)



  • All defences available + set-off available at time of notice (9.1.13)



Ch. 9.2. Substitution or addition of debtor

  • Ch. 9.2. Substitution or addition of debtor

  • 3 Types (9.2.5)

  • - substitution: original debtor discharged

  • - subsidiary liability of the original debtor

  • - solidary liability of old & new debtor (« joint and several » in Eng. law)

  • Several more specific institutions or instruments can be classified in this scheme.

  • Independent new debtors ? See e.g.: documentary credit, independent guarantees



Ch. 11.1. Plurality of debtors (2 types):

  • Ch. 11.1. Plurality of debtors (2 types):

  • - either separate debtors

  • - or « joint and several » (= solidary debtors)

  • > Art. 11.1.3. ff deal with the availability of defences, effects of performance and set-off, release, etc. for the other debtors.

  • > Art. 11.1.9 ff. deal with the apportionment of shares and the internal relationship between solidary debtors (contributory claim + subrogation)

  • No category of ‘joint debtors’

  • Ch. 11.2. Contains rules on plurality of creditors (3 types)

  • - separate

  • - joint and several

  • - joint



System of a double period: 3 / 10 years (10.2)

  • System of a double period: 3 / 10 years (10.2)

      • - 3 years from (constructive) knowledge (after the creditor knows or ought to know the facts as a result of which the creditor’s right can be exercised)
  • - 10 years from the day the right can be exercised

  • Renewal of limitation period by acknowledgment (irrespective of 10 years) (10.4)

  • Suspension in case of proceedings (judicial, arbitral and similar): 10.5 to 10.7 – without a one year extension !?

  • Prolongation until one year after impediment (force majeure, death or incapacity) ceases: 10.8

  • Effects of expiration:

  • - « weak effect » (art. 10.9); no restitution because not « undue » (10.11)

  • - set-off possible until assertion of prescription (10.10)

  • - not ex officio by the judge




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