International Contract Law: A Comprehensive Guide

Contracts (Rights of Third Parties) Act 1999

The act allows third parties to enforce terms of contracts that benefit them in some way, or which the contract allows them to enforce. It also grants them access to a range of remedies if the terms are breached. The act also limits the ways in which a contract can be changed without the permission of an involved third party.

Characteristics of an International Contract for Sale of Goods

Parties located in different jurisdictions.

Risks in Foreign Trade

  • Political – war, terrorism
  • Foreign credit – non-payment or delays in payment
  • Transportation risks – loss or damage to goods during transit
  • Foreign Exchange risk – e.g., depreciation in buyer’s currency

Main Systems of Law in the World

  • Civil law
  • Common law
  • Religious law (Sharia law)

Dual Liability

The liability of the owner of stock that is subject to assessment up to its face value although originally full-paid.

Characteristics of the English Legal System – Common Law

A body of unwritten laws based on legal precedents established by the courts. Common law influences the decision-making process in unusual cases where the outcome cannot be determined based on existing statutes or written rules of law.

  • Constitutional monarchy but no written/codified constitution – fundamental laws. THORBURN V SUNDERLAND CITY COUNCIL
  • Separation of powers
  • Antiquity
  • No legal code
  • Judge-made law – in theory, they interpret the law – precedent
  • Adversarial system of trial v. Inquisitorial system
  • Presumption of innocence
  • Standards of proof
  • Sources of law
  • Hierarchy of courts

Characteristics of All Companies Including Corporate Veil

  • Separate legal entity
  • Limited liability
  • Perpetual succession
  • Ownership of property
  • Contractual capacity
  • Criminal liability

The Corporate Veil

A legal concept that separates the personality of a corporation from the personalities of its shareholders and protects them from being personally liable for the company’s debts and other obligations.

Classification of Companies

  • Public & Private
  • Holding and Subsidiary
  • Limited, unlimited, limited by guarantee
  • Single Member Companies
  • European Public Limited Liability Companies

Duties of Company Directors and Company Officers

  • Act within powers – HOGG V CRAMPHORN
  • Promote the success of the company
  • Exercise independent judgment
  • Duty of Care – City Equitable Fire Insurance
    A moral or legal obligation to ensure the safety or well-being of others.
  • Fiduciary Duty – Conflicts of interests IDC V COOLEY
    Legal term describing the relationship between two parties that obligates one to act solely in the interest of the other.

Steps in Negotiating an International Contract

  • Incoterms
  • Means of transport (Contract with carrier, Containers, Shipping marks, Documentation like Bill of Lading)
  • Risk, title, and insurance
  • Time and place of delivery
  • Delay and consequences (force majeure)

Letters of Credit

  • Revocable – may be canceled by the buyer or Issuing Bank or modified without any prior consent of all the parties.
  • Irrevocable – IB commits to honor the credit even if told not to by the buyer.
  • Confirmed/Unconfirmed. Advisory Bank backs up the IB’s undertaking to pay.
  • Autonomy of the L/C. IB still has to pay even if there is a breach of contract of sale.
  • Fraud. Where fraud by the seller and IB has notice, the IB is not obliged to pay under the L/C.
  • Independence Principle (Because L/C is independent of the export contract, IB is concerned with documents not facts such as quality or quantity of goods. Conversely, if documents deviate, IB is entitled NOT to pay. JH RAYNER & Co Ltd v HAMBRO’s BANK (1943).
  • Doctrine of Strict Compliance. This principle (the terms of the documents presented to the IB must strictly conform to the requirements of the L/C) applies to all the contracts involved in the credit operation. But the buyer can ‘waive’ any minor defects to allow the seller to be paid.

Private International Law

In a conflict of private international laws problem, a court will apply the principles of ‘Conflict of Laws’ or Private International Law according to its own legal system (called the ‘Lex Fori).

A court hearing a case which possesses a foreign element has to answer:

  • Does it have jurisdiction (Territorial, In Rem, Subject matter, In personam)?
  • Which law governs the dispute?

Forum Non Conveniens

A court which has jurisdiction may nevertheless decline to hear the case if there is a more convenient court available to hear the matter or justice would be better served. IN RE UNION CARBIDE CORPORATION GAS (1987)

Party Autonomy Rule

Parties are free to choose the applicable law for their contract. They can even choose law which has no connection with that country. AKAI PTY LTD V THE PEOPLE’S INSURANCE CO LTD (1996).