Lecture 10+11+12: Repetition Flashcards
(176 cards)
1
Q
Define civil law.
A
Origin:
- Rooted in Roman law, particularly the Corpus iuris civilis (compiled under Emperor Justinian).
- Developed primarily in continental Europe.
Meaning: The term “civil” was used to distinguish it from church law.
Main idea:
- Legal rules are codified - laws are written down and organized into systematic legal codes.
- Legal codes cover specific areas e.g. contract law.
- Law is applied abstractly, not case-by-case.
- Contains clear, general rules that judges must follow.
Characteristics:
- Codification of legal regulations
- Often abstract and systematic
- Non-case-based formulation (not based on precedent)
- Emphasizes stability, fairness, and legal certainty
2
Q
Define common law.
A
Origin:
- Developed in England during the 12th century under King Henry II.
- Aimed to unify local customs through a royal court system.
Meaning: Called “common” because it applied uniformly across the kingdom, unlike local or feudal laws.
Main idea:
- Law is developed through judicial decisions (precedent), not only written statutes.
- Courts are bound by earlier decisions (principle of stare decisis).
Characteristics:
- Case-based legal system dependent on precedent.
- Increasingly supplemented by statutory law (laws written and passed by a government).
- Historically: instable, unreliable and unfair.
- Today: stable, reliable and fair but still influenced by the duality of common law and equity.
3
Q
What are the major differences between contracts in common law and civil law?
A
Common law contracts are longer, more detailed, and use strict textual interpretation (the “four corner rule”).
Civil law contracts rely more on good faith and interpret contracts in light of the surrounding context and intent of the parties.
4
Q
What is the major difference between common law and civil law in terms of contract formation?
A
In contract formation, consideration is a prerequisite of liability in common law.
5
Q
What is the concept of consideration?
A
Each party must give something in return (a promise, service, or payment), which is required in common law for a contract to be valid.
6
Q
What are the implications of the requirement of consideration in common law?
A
- One-sided promises (e.g. gifts) are not enforceable as contracts.
- Amendments and side agreements must also include new consideration.
- This creates uncertainty in enforcing informal or goodwill-based agreements.
- Parties often need to draft contracts more carefully to ensure consideration is clear.
7
Q
What is the major difference between common law and civil law in terms of legal remedies?
A
Equity
A part of common law that offers extra remedies like forcing someone to do something (specific performance) or undoing a deal (rescission), which regular law doesn’t always allow.
These remedies are given only if the judge thinks it’s fair, not automatically.
8
Q
What are the practical consequences of the equity system with regard to contract design in common law?
A
- Longer contracts: Compared to civil law, common law contracts are longer and more technical to reduce reliance on equity.
- Contracts must be very detailed: Because equity remedies are not guaranteed, parties rely on contractual clauses for protection.
- All possible situations are written into the contract: Courts won’t “fill in the gaps” unless fairness demands it and equity applies.
- Increased use of disclaimers, remedies, and precise terms: To avoid relying on a judge’s discretion, contracts often include specific fallback solutions.
9
Q
Do you agree or disagree with the statement:
“Forum selection is totally overestimated. In the end, judges and courts in common law and in civil law systems follow the same rules of interpretation. It does not really matter whether your case is tried by a common law judge in London or by a civil law judge in Paris.”
Please state your reasons.
A
I disagree with the statement.
While both common law and civil law judges aim to resolve disputes fairly, they do not follow the same rules of interpretation. Common law systems (e.g. England) emphasize the literal meaning of contract terms and rely on formal doctrines like the parole evidence rule and precedent. Civil law systems (e.g. France) focus more on the intent of the parties, applying principles like good faith, even when not expressly stated in the contract.
Moreover, procedural differences—such as rules on disclosure, evidence, and judicial discretion—can lead to very different outcomes, even from the same contract text.
Finally, enforcement, speed, cost, and predictability of proceedings also vary greatly between jurisdictions.
Therefore, forum selection is strategically important, especially in international commercial contracts.
10
Q
Pre-contractual phase: Exchange
A
Finding the terms and conditions of the contract.
11
Q
What are the two types of exchange in the pre-contractual phase?
A
1. Informal exchange: E-mails, calls and meetings.
2. Formal exchange: Documents.
12
Q
Name some documents for the formal exchange in the pre-contract phase.
A
- Letter of Intent (LOI)
- Non-Disclosure Agreement (NDA)
- Memorandum of Understanding (MoU)
- Heads of Agreement (HoA)
13
Q
Define ‘Letter of Intent (LoI)’. When can it be considered binding?
A
Outlines the aims and intentions of negotiations and shows commitment.
It is typically non-binding unless it contains binding language (e.g. ‘agree to’, ‘shall’) or binding clauses (e.g. confidentiality, exclusivity).
14
Q
Define ‘Non-disclosure agreement (NDA)’.
A
A legally binding contract that ensures confidential information shared between parties remains undisclosed to third parties.
15
Q
What is the difference between contractual confidentiality clauses and standalone NDAs?
A
Confidentiality clauses protect info within a contract.
NDAs protect broader or external info shared during negotiations.
Both must be consistent to avoid legal conflict.
16
Q
Define ‘Memorandum of Understanding (MOU)’. When it is created? When can it be considered binding?
A
A non-binding agreement between parties that outlines the terms and mutual understanding of a potential future deal or collaboration.
Offen created mid-contractual negotiations to summarise the agreed terms so far during negotiations.
The agreement is binding if wording, content, and conduct support a contract-like commitment. Always include disclaimers if you want it to stay non-binding.
17
Q
Define ‘Heads of Agreement (HoA)’. When can it be considered binding?
A
A document summarizing the key terms of a proposed agreement, serving as a basis for negotiation before drafting a formal contract.
A HoA is not automatically binding. The document is binding if wording, intent of parties and content (essential elements) support a contract-like commitment. Always include disclaimers if you want it to stay non-binding.
18
Q
Pre-contractual phase: Negotiation
A
Determining liability pre-contract.
19
Q
What are the four strategies in contract negotiation?
A
Negative Strategic Posturing: No real intent to make a deal; aims to delay or gather information.
Positive Strategic Posturing: Parties want a contract but act opportunistically, hiding or misrepresenting information.
Collaborative Strategic Posturing: Both parties work transparently to reach a fair, balanced agreement.
Proactive Contracting: Focuses on long-term value, risk prevention, and mutual trust through open communication and planning.
20
Q
What is the legal importance of pre-contractual negotiations?
A
They may result in liability if negotiations are broken off in bad faith or if one party misleads the other. Some documents (like Letters of Intent) may create binding obligations depending on their wording and use.
21
Q
What are the two types of liability pre-contract?
A
- Contractual liability
- Non-contractual liability
22
Q
Define ‘Contractual liability’.
A
This arises when parties become legally bound by obligations before signing a final contract, typically through:
- Formal exchange of pre-contractual documents (e.g., LOI, MoU, HoA) that include binding language or specific clauses (e.g., confidentiality, exclusivity), which is signed by both parties.
- Clear mutual agreement on essential terms, even if informal (e.g., email, meeting, behavior).
- Conduct showing both parties acted as if a contract was in place.
Even if labeled “non-binding,” a court may still find liability if the document and behavior indicate intent to be bound.
23
Q
When is pre-contractual documentation legally binding? When not? (generally)
A
Look for the four/five prerequisites:
1. Offer and acceptance
2. On essential elements, i.e. parties, product (type and quantity) and price.
3. Intention to be legally bound, i.e. language, behaviour.
4. Consideration (/Synallagma), i.e. mutuality of the agreement, meaning the requirement that both parties receive some form of benefit from the contract.
5. Formal requirements i.e. any legal conditions concerning the format of a contract (such as whether it must be in writing or signed), but most simple contracts are valid without them, unless specific forms like deeds or written agreements are explicitly required by law.
Documents are legally binding when:
- Language: It uses clear binding language (e.g. “shall,” “agree to,” “must”).
- Essential elements: It includes essential terms (price, goods, delivery, etc.).
- Intention: Both parties show intent to be bound (e.g. by starting performance).
- Label: Clauses are labeled as binding (e.g. confidentiality, exclusivity, costs).
Documents are not legally binding when:
- It is marked “subject to contract” or “not legally binding.”
- It only outlines intentions or negotiation goals.
- It lacks essential terms or clear mutual obligations.
- Party conduct shows no intent to form a contract.
24
Q
What is the difference between consideration in common law and synallagmatic obligations in civil law?
A
Consideration in common law requires something of value exchanged to make a contract binding = Give and take!
Synallagmatic obligations in civil law refer to mutual obligations without requiring consideration as a separate element = Mutuality!
25
Does a contract have to be in writing to be valid?
No. Many legal systems recognize oral agreements or contracts formed by conduct if the basic elements are present.
26
How can parties prevent a pre-contractual document from creating unintended legal obligations?
By using disclaimers like:
* Label as 'subject to contract'
* Write a 'No liability' clause
* Write a 'Split' clause
Generally, avoiding binding language, and clearly stating the non-binding intent in the document is key!
27
Define 'Non-contractual liability'.
A party can be held legally responsible even if no final contract was signed.
This protects fairness during negotiations, even without a signed contract.
28
Compare the treatment of non-contractual liability in civil law vs. common law systems pre-contract.
Civil law recognizes **good faith duties** (e.g. culpa in contrahendo, meaning an honest effort to each an agreement), making parties liable for bad-faith negotiations.
Common law generally rejects this but may apply **promissory estoppel** (i.e. stops a party from backing out of a promise if the other party relied on it) or specific document clauses.
29
Why does one need to negotiate in good faith?
To avoid negative strategic posturing in the negotiation.
Negative strategic posturing (negotiation strategy): At least one party has no interest to consummate a contract.
30
In what situations can a party be held liable for breaking off negotiations?
In civil law, if trust was created and unjustly broken.
In common law, only if conduct amounts to promissory estoppel or if there’s a contractual duty.
31
**Contractual phase: Laws and jurisdiction**
Determining the laws, jurisdiction etc.
32
What is the difference between soft law and hard law?
Soft law consists of non-binding rules, principles, or standards (e.g. INCOTERMS, UNIDROIT Principles) that guide behavior and interpretation, but do not have legal force unless adopted in a contract.
Hard law refers to legally binding rules—such as statutes, regulations, and treaties—that are enforceable by courts or arbitration.
33
Who creates soft law? How is it used in international business?
Soft law is published by international organizations like:
* ICC (International Chamber of Commerce): INCOTERMS, model contracts etc.
* UNIDROIT: Principles of International Commercial Contracts.
* European Commission: Principles of European Contract Law (PECL)
* Trade associations or standard-setting bodies: Sector-specific guidelines
It helps standardize business practices but lacks formal legal enforceability unless incorporated into a contract.
34
What is the ICC and what does it do in international commerce (name documents)?
Short for: **'International Chamber of Commerce'**
A non-governmental organization based in **Paris, France** that publishes widely used trade rules (and tools) to support global business practices. Including:
**International Commercial Terms (INCOTERMS):** Defines trade terms and responsibilities between buyers and sellers in global trade.
**Uniform Customs and Practice for Documentary Credits (UCP 600):** Governs letters of credit (LCs) in international trade. Used by banks worldwide to standardize documentary credit transactions.
**Uniform Rules for Collections (URC 522):** Regulates documentary collections in international trade.
35
For hard law, what is the hierarchy of legal frameworks (key four legal sources)?
**1. Public International Law:** Governs relations between states and international entities - e.g. Geneva Conventions (limiting the suffering caused by war).
**2. International Agreements:** Treaties and agreements made between two or more countries - e.g. The Paris Agreement (climate change).
**3. EU Law:** Laws that apply to European Union (EU) member states, overriding conflicting national laws, which includes primary treaties and secondary laws like directives and regulations - e.g. GDPR rules.
**4. National Law:** Laws created and enforced by each individual country - e.g. tax law.
(**5. Transnational Law and Lex Mercatoria:** Non-state legal principles and business customs influencing contracts.)
Key takeaway:
* International laws and agreements set broad legal frameworks that countries follow.
* EU law (for EU members) takes priority over national law if they conflict.
* National laws are the most detailed and govern daily life, but they must comply with higher-level laws.
36
Does EU law supersede national law?
Yes, EU law generally supersedes national law in areas of EU competence.
This principle is known as the supremacy of EU law.
* National laws conflicting with EU law may be set aside or overridden.
* Supremacy ensures uniform application and interpretation of EU rules across member states.
* The hierarchy of legal norms within the EU supports the consistent application of EU policies.
No, EU law does not supersede national law for non-member states.
37
What is transnational law?
Non-state-based (private law) legal principles used in international trade.
It is often **soft law** i.e. not universally accepted and no binding force (e.g. lex mercatoria).
* Regulation of entire area of law (e.g. commercial law) or parts of it (e.g. INCOTERMS).
* Typically developed by public or private international organizations (e.g. ICC, UNIDROIT).
38
What does the ICC have to do with transnational law?
The ICC are producing passages for contract law, i.e. standardized rules like ICC Arbitration Rules and INCOTERMS for global contracts.
Also:
* Arbitration: Provides a platform for resolving international disputes under transnational frameworks.
* Enforcement: Helps enforce international arbitration decisions under the New York Convention.
* Promotion of trade: Supports harmonizing global trade practices.
39
Is transnational law used as a basis for international business contracts?
Yes, international business contracts often rely on transnational legal frameworks to ensure consistency, fairness, and enforceability across different jurisdictions.
A key example is the United Nations Convention on Contracts for the International Sale of Goods (CISG), which provides a uniform set of rules for international trade.
40
What is the CISG and why is it important?
Short for: 'The United Nations Convention on Contracts for the International Sale of Goods'
The UN Convention on Contracts (treaty) that standardizes rules for international sales of goods and applies by default unless excluded.
41
What are the advantages and disadvantages of using transnational law for international business contracts?
Advantages:
* Uniformity: Consistent legal framework across borders.
* Predictability: Clearer legal outcomes for international trade.
* Risk reduction: Minimizes conflicts between national laws.
* Cost-effective: Reduces legal costs by avoiding multiple legal systems.
* Faster dispute resolution: Standardized arbitration or mediation options.
Disadvantages:
* Limited scope: May not cover all aspects of complex contracts.
* Familiarity issues: Businesses may struggle with transnational laws.
* Enforcement challenges: Difficulty in enforcing decisions across jurisdictions.
* Conflict with local laws: National laws may override transnational law.
* Uncertainty: Potential for varying interpretations.
42
What is mandatory law?
Laws that can not be suspended = No choice, must follow; so no room for negotiation.
* These laws are strict and must be followed - you cannot change or ignore them.
* The government enforces these laws because they are essential for society.
* Example: Paying taxes, criminal laws, and workplace safety regulations.
43
What is dispositive law?
Law that might be superseded = Choice; can be changed if both parties agree (e.g. contract terms).
* These laws can be modified or overridden by agreements between people or businesses.
* If no specific agreement is made, the default law applies.
* Example: A contract between two businesses; if they don’t specify payment terms, the default law applies. But if they agree on different terms, those take priority.
44
What is the difference between mandatory law and dispositive law?
Mandatory law (ius cogens) cannot be overridden by contract; it must always apply.
Dispositive law (ius dispositivum) provides default rules that parties can change by agreement.
45
Define governing law.
The law(s) of which legal system(s) are applicable to the contract.
46
Define the areas of choice in regards to governing law.
Ket takeaway:
* No choice: Areas where the law applies automatically and cannot be changed (e.g., criminal law, tax law).
* Choice: Areas where parties can agree on the legal system governing their contract or dispute (e.g., contract law, commercial law).
Explanation:
**No choice:** Some laws are mandatory and cannot be changed by agreement.
These include:
1. **Constitutional law:** Defines government structure and fundamental rights.
2. **Criminal law:** Covers offenses and penalties.
3. **Tax law:** Defines taxation rules.
4. **Labour law:** Protects workers' rights.
5. **Consumer protection law:** Ensures fair trade practices.
Key Point: Individuals and businesses must follow these laws regardless of agreements.
**Choice:** In certain legal areas, parties can choose which law applies to their contracts and disputes.
These include:
1. **Contract law:** Parties can agree on which national law governs their contract.
2. **Commercial law:** Businesses can choose applicable trade rules.
3. **Non-contractual obligations:** Some civil and commercial matters allow for jurisdiction choice.
4. **Jurisdiction:** Parties can decide which courts/arbitration tribunal will handle disputes.
Key Point: In international business and contracts, parties often negotiate the governing law and jurisdiction for resolving disputes.
47
Define jurisdiction.
The legal entity is granted the right to enact justice.
48
Define the areas of choice in regards to jurisdiction.
1. State jurisdiction vs. Arbitration (private jurisdiction)
2. Location of court (State, Region, City)
3. Level of court
* Ordinary courts: primary/secondary, first/second instance
* Arbitration: ordinary/fast track, ad hoc/institutional
4. Function (general/specialized)
5. Scope
* All disputes determined by one court vs. only partial assignment
* Contractual issues only vs. non-contractual issues
6. Mode
* Prorogation (choice of a specific court) vs. Derogation (express exclusion of a specific court)
* Exclusive jurisdiction (jurisdiction of one court) vs. Concurrent jurisdiction (optional jurisdiction in another court) vs. Asymmetric jurisdiction
49
What are the two main factors providing security in the choice of governing law and jurisdiction?
1. The chosen jurisdiction has to uphold the choice
2. Any excluded jurisdiction(s) has/have to honor the choice
50
How does one make sure that a contract ends up in the right legal environment?
Two options:
**1. Choose** a governing law and jurisdiction in a contract (the better option).
**2. Rely on legal regulations** to determine the governing law and jurisdiction.
51
What elements should a balanced governing law clause include?
**1. Choice of state jurisdiction** (prorogation): Location, level and function
**2. Choice of exclusive vs. non-exclusive jurisdiction**
**3. Clarification of scope:** "Hear, settle and/or determine any dispute ... arising out of ... including ..."
52
Why is it important to specify governing law in an international (commercial) contract?
It determines how the contract is interpreted, which remedies are available, and how it is enforced.
Without it, uncertainty and increased legal risk arise.
53
Is it wise to make no choice of jurisdiction? What are the strategic risks of making no choice of jurisdiction?
No, because courts may default to national conflict rules, leading to unpredictable results, inconvenient forums, or unfriendly jurisdictions.
54
What happens if you make no choice of jurisdiction?
Jurisdiction will be decided by default rules under international conventions or national laws, often based on the defendant's domicile or other indirect criteria - making the outcome less predictable.
55
Where can one more or less reliably predict the outcome in terms of choice of jurisdiction?
Within the European Union, the UK, and other countries applying harmonized rules (e.g. under Brussels Ia or the Lugano Convention), the outcome is relatively predictable even without a choice.
56
Can you name some major harmonizing legislation in terms of jurisdiction?
* Brussels Ia Regulation (EU)
* Lugano Convention
* Hague Choice of Court Convention
* National laws aligned with international standards
57
Define Brussels Ia Regulation.
A regulation that harmonizes rules on jurisdiction and enforcement of judgments in civil and commercial matters within the EU.
Countries follow the same rules to decide:
* Which court should hear a case (jurisdiction), and
* How to recognize and enforce a court decision made in another country.
This means that if a court in one EU country makes a ruling, other EU countries must respect and enforce that ruling easily and consistently. This avoids legal conflicts and delays in cross-border cases.
58
Where does one go to court if nothing is written in the contract?
The court in the town where the defendant is sitting.
59
Define the Lugano Convention.
An agreement between the EU, Norway, Iceland, and Switzerland that mirrors Brussels Ia, ensuring similar jurisdiction rules among these countries.
60
Define the Hague Choice of Court Convention.
An international treaty that ensures courts respect and enforce exclusive jurisdiction clauses in international contracts.
61
What legal risks are associated with courts not bound by Brussels Ia or the Hague Convention (excluded forum)?
A valid jurisdiction clause may not be upheld by the court if the country is not bound by international conventions like Brussels, Lugano, or Hague.
They may refuse to honor jurisdiction or governing law clauses, leading to 'exorbitant jurisdiction' or enforcement issues.
62
Define the 'Rome Regulations (Rome I & II)'.
EU laws that set rules for determining the governing law in contracts (Rome I) and non-contractual matters like torts (Rome II) in cross-border disputes.
63
**Contractual phase: Contract drafting**
64
In contract drafting, what are two starting points?
1. Drafting from precedent - model or existing contracts
2. Drafting from scratch (zero-based drafting)
65
What are model terms and contracts? What are they used for?
Privately prepared and generally formulated contractual terms or entire contracts to be used in certain circumstances.
The starting point/basis for the contract in the drafting process.
66
Please describe the advantages and disadvantages of the use of model contracts and terms in the process of contract drafting.
Advantage: Saves time, ensures standardization and covers common risks.
Disadvantage: May include default arbitration or INCOTERM assumptions not suitable for all parties; requires tailoring to fit the specific transaction.
67
Is it a good idea to use a random model contract from the internet as the basis for your own contract?
No, not a random one.
However, one can use a model contract from a credible source like the ICC, but it has to be adjusted to fit the specific circumstances of the deal and they are still negotiable. Otherwise the contract is invalid.
68
In contract drafting, what elements are essential to remember?
* Governing law - remember civil law vs. common law
* Litigation (public) vs. arbitration (private)
* Incorporation of model and standardized terms with mandatory law to tailored contracts
* Clauses - remember to visualize the entire contract lifecycle from goods production to end of warranty duties
* Language - Cross system contracts
* Style
69
Define ‘Cross system contracts’.
Contracts drawn up in a language different from the language inherent to the law governing the contract
Problems:
* Legal wording is inseparably intertwined with the legal concept itself.
* Typically, a direct translation will not capture the intended content of the agreement.
70
What are three general recommendations for contract drafting?
**Use model contract**, specific for the industry, which match the governing law used in the country of interest.
**Visualize the entire contract lifecycle**: From goods production to the end of warranty duties (e.g. five years into the sales).
* Production: E.g. Force Majeure (common law).
* Storage:
* Delivery: E.g. INCOTERMS.
* Conformity:
* Warranty/liability:
* Payment: Transfer risk (INCOTERMS), currency risks and default risks.
**Anticipate possible future events**, especially possible future disputes.
71
**Contractual phase: Contract formation** - Structure and clauses
72
Describe the main parts of a commercial contract.
Main parts include:
* Introduction (Preamble, Recitals etc.)
* Definitions
* Primary operative provisions (clauses on price, payment, delivery, etc.)
* Secondary operative provisions (clauses on liability and limitation, indemnification, liquidated damages, etc.)
* Framework provisions (clauses on law and jurisdiction, assignment, merger)
* Testimonium
73
What is a preable? How does it vary from common law to civil law?
An introductory section that:
* Names the **parties** involved
* Defines the **purpose** of the agreement
* Sets the **context** for why the contract is being made
Generally helpful in avoiding misunderstandings.
For both legal frameworks: Non-binding and no contractual duty.
* Common law: Necessary for guidance of interpretation due to the "Four Corner Rule"
* Civil law: Helpful for guidance of interpretation
74
Define the definitions section of a contract. For which legal framework are definition especially important? Why?
A section that defines key terms relevant for the contract, like “Business day”.
Important in common law, because this section defines any words which might be necessary, due to low trust in legal books.
75
What are primary operative provisions?
PLAN A: The main terms of a contract that state the core obligations of each party.
Stating the contractual and statutory obligations.
They usually include clauses on:
* Price & Payment
* Delivery terms
* Scope of goods or services
These provisions are legally binding and define what the contract is really about.
76
What is the difference between statutory and contractual obligations?
Statutory obligations are duties imposed by law, regardless of what the contract says (e.g. consumer protection rules, product liability, mandatory safety standards).
Contractual obligations are duties that parties have agreed to in a contract (e.g. deliver goods, pay a price).
77
What are three examples of primary operative provisions?
1. Sales clause
2. Price clause
3. Payment clause
78
What is a ‘Sales’ clause?
A part of a contract that defines the **sale**:
* Who is selling?
* What is being sold?
* To whom?
* In what quantity?
* Under what conditions?
79
What is a ‘Price’ clause?
A part of a contract that defines the **price**:
* How much the buyer must pay?
* Per unit or total?
* In which currency?
Optional: rules for price adjustments (e.g. based on quality or market index)
80
What is the difference between a fixed price clause and a variable price clause?
A fixed price clause sets a static, agreed price.
A variable price clause adjusts price based on factors like quality, index changes, or earnings (i.e. earnout clause where the seller gets extra payment if the company meets earnings targets).
81
What is a ‘Payment’ clause?
A part of a contract that defines the **payment terms and conditions**:
* When payment is due?
* Conditions for payment (e.g. delivery, invoice)?
* Method of payment (e.g. cash, wire transfer, letter of credit)?
* Target (account)?
* Currency of payment
* Penalties for late payment (i.e. interest)?
* Security mechanisms (e.g. advance payment, guarantees like Letter of Credit)
It ensures both parties know how and when money will be transferred.
82
How is payment secured?
In the ideal world:
* The seller wants payment in advance (before shipment of goods) i.e. **advance payment**.
* The buyer wants payment later (after receival of goods) or even better as a monthly payment for all deliveries in that period i.e. **open account**.
There is a gap; therefore, one looks for the best option in the middle, like **letter of credit** or **documentary collection**. That is documents against payment!
83
What is a 'Letter of Credit (L/C)'? What is the buyer vs. seller perspective?
Bank guarantees payment to seller if seller provides bank certain documents related to sold goods.
**Buyer's perspective:** Better for buyer than advance payment, but costly.
**Seller's perspective:** No trust in buyer is needed, but trust in bank issuing L/C is vital.
84
What legal framework governs L/C in international trade?
There is no binding international law for letters of credit.
The most commonly used framework is the **UCP 600** (Uniform Customs and Practice for Documentary Credits), developed by the ICC.
UCP 600 is soft law, meaning:
* It is not binding by default.
* It has no trade usage status.
* It must be explicitly incorporated into contracts.
85
Describe how the L/C works.
**1. Buyer and seller agree** on a deal, and the buyer requests an L/C from their bank.
**2. Bank issues L/C:** The buyer’s bank guarantees payment to the seller if all agreed conditions are met.
**3. Seller ships goods** and provides proof (like shipping documents).
**4. Bank verifies documents**, and if all conditions are met, the bank releases payment to the seller.
**5. Buyer pays bank:** The buyer reimburses the bank as per their agreement.
86
What are the advantages of using L/C?
* Sellers feel safe, because they get a bank’s guarantee of payment.
* Buyers gain trust, because payment is only made if conditions are met.
* Reduces risk of fraud or non-payment in international trade.
87
What is 'Documentary Collection (D/C)'? What is the buyer vs. seller perspective?
Bank does not guarantee payment to seller, but forwards documents to buyer upon collection of payment from buyer.
**Buyer's perspective:** Less costly than L/C, goods may be stuck if not all requirements are met.
**Seller's perspective:** More risky than LC, clearing might be difficult if conditions are not met entirely.
88
What legal framework governs D/C in international trade?
There is no binding international law for documentary collections.
The most widely used framework is the **URC 522** (Uniform Rules for Collections), developed by the ICC.
URC 522 is soft law, meaning:
* It is not binding by default.
* It has no trade usage status.
* It must be explicitly incorporated into contracts.
89
Describe how the D/C works.
**1. Seller ships goods** and prepares shipping documents (invoice, bill of lading, etc.).
**2. Documents sent to bank:** The seller’s bank sends these documents to the buyer’s bank with instructions on when and how the buyer should pay.
**3. Buyer makes payment:** The buyer can receive the shipping documents only after making payment or agreeing to pay later.
**4. Documents released:** Once the buyer meets the payment terms, they get the documents needed to claim the goods.
90
Define the two types of D/C.
**1. Documents Against Payment (D/P):** The buyer must pay immediately to get the documents.
**2. Documents Against Acceptance (D/A):** The buyer agrees to pay at a later date (credit terms).
91
What are the advantages of using D/C?
* Safer than open account trade (where goods are shipped without any guarantee of payment).
* Cheaper than a L/C, but with more risk since banks do not guarantee payment.
* Useful for trusted trade partners where some level of risk is acceptable.
92
Summarise and compare L/C and D/C as payment securitization tools.
* **Letter of Credit (L/C):** Bank guarantees payment if seller meets conditions (safer for seller).
* **Documentary Collection (D/C):** Bank forwards documents without guaranteeing payment (less secure).
93
Summarise what legal instruments govern the delivery of trade documents?
* UCP 600 = Letters of Credit (L/C)
* URC 522 = Documentary Collection (D/C)
Both are soft law developed by the ICC.
94
What is a documentary breach in international trade? What are the common forms of documentary breach?
Occurs when:
* Non-delivery of documents
* Incomplete or incorrect delivery (do not match agreed terms)
* Defective delivery (content does not conform)
95
What are the two primary categories of documents in international trade?
1. Simple Documents
2. Documents of Title
96
What are 'Simple Documents'?
Non-negotiable documents used in international trade to facilitate customs clearance, shipment tracking, and compliance.
They do not transfer ownership of goods, but serve as records of shipment, origin, and transaction details.
97
What are the four primary types of Simple Documents?
1. Sea Waybill
2. Dock Receipt
3. Commercial Invoice
4. Certificate of Origin
98
What are 'Documents of Title'?
Legal documents that prove ownership of goods and can be used to transfer ownership during transit.
They allow the buyer or a third party to claim the goods upon arrival and can be used as collateral for financing.
Whoever is in possession of the documents are allowed to have the goods.
99
What are the three primary types of Documents of Title?
1. Bill of Lading
2. Dock Warrant
3. Warehouse Receipt
100
What is a 'Bill of Lading'?
A key transport document issued by the carrier, serving as a receipt, contract of carriage, and document of title, allowing transfer of goods' ownership.
Defines:
* Type of good
* Quantity
* Destination
* Signature of shipper, carrier and receiver
101
What is the legal role of a Bill of Lading in international trade?
It serves as:
* Receipt for shipped goods
* Evidence of the contract of carriage
* Document of title (transferable ownership).
102
The INCOTERMS are standardized trade terms which define responsibilities, payment, risk and documents, but why is it important to specify the time of ownership transfer in a contract?
Because ownership carries legal responsibilities and risks. Knowing exactly when ownership transfers helps determine liability.
103
What is 'conformity of goods' in a contract? What are the key criteria to assess conformity?
It refers to whether the goods/services/rights delivered meet the agreed criteria in the contract.
Criteria:
1. Quantity
2. Quality
3. Packaging
104
Why is conformity important?
To ensure goods are usable by the buyer and to determine if the seller fulfilled their obligations.
105
What is a 'Warranty' clause? What are common limitations or exclusions in warranties?
A contract term where one party promises that the product/service is free from defects and meets specifications - the quality, condition, or performance of a product or service.
Warranties may exclude certain damages like misuse or normal wear and tear.
106
Where can conformity and warranties be defined in a contract?
* Definitions Clause
* Sales Clause
* Packaging Clause
* Product Specs Appendix
* Warranty Clauses
107
What are secondary operative provisions?
PLAN B: If something goes wrong.
The secondary terms that support the main terms of the contract by dealing with risk, responsibility, and consequences.
They often include clauses on:
* Liability & limitation
* Indemnification (compensation for loss)
* Liquidated damages (agreed penalty for breach)
These provisions are legally binding and help manage what happens if something goes wrong in the contract.
108
Define ‘Liability’.
In short: Responsibility and obligation to pay for damage, harm etc.
109
Explain the difference between common law and civil law - the path from contract to remedies.
Common law follows a linear path:
1. Contractual Obligation
2. Breach of Contractual Obligation
3. Causality
4. Damage
Once damage is proven from breach, the remedies available are:
* Damages
* Termination
* Other remedies (e.g. specific performance, injunction) only available at equity - granted at the court’s discretion.
Civil law allows multiple bases for liability:
1. Contractual Obligation
2. Statutory Obligation
3. Other Breach (e.g. tort)
4. Fault (often required)
5. Causality
6. Damage
Civil law systems are more flexible:
* Remedies like damages, termination, and other legal consequences are more broadly and systematically codified.
* Courts may apply different combinations of the elements based on the type of breach or obligation.
Key takeaways:
* Common law is stricter: Breach and damage must clearly follow from contractual obligation; only limited remedies unless equity applies.
* Civil law is broader: Multiple legal sources (statutory, contract, tort) can lead to liability, and more remedies are directly available by law.
110
Define ‘Fault’.
It means a party is responsible only if they acted negligently or wrongfully - not if the problem was beyond their control.
A concept mainly in civil law.
111
Explain the difference between fault-based liability and strict liability in contract law.
**Fault-based liability (civil law):** Requires proof of negligence or intent.
**Strict liability (common law):** Liability arises from breach, regardless of fault.
112
Explain the key difference between common law and civil law in determining liability.
The key difference lies in the role of **fault** in establishing liability.
**Common law: Liability for breach of contract is generally strict** - fault is not required.
* If you fail to perform (e.g. no delivery), you are liable, even if it wasn't your fault.
**Civil law: Liability usually requires fault.**
If the breach occurred due to circumstances beyond your control, you may not be held liable.
113
Define ‘Damage’.
Refers to the loss or harm caused by the breach. It’s what the affected party is usually compensated for.
114
What is direct damage in contract law?
The primary consequence, easy to quantify and directly linked to the event.
Example: Car repair or medical costs after a collision.
115
What is consequential (indirect) damage in contract law?
The secondary effect of the breach, not immediate, and harder to quantify.
Example: PTSD or emotional distress after a car accident.
116
How can contracts manage risk of liability for damages?
By including a clause that limits liability to direct damages only, excluding indirect or consequential damages.
117
Define ‘Causality.’
There must be a causal (clear) link between the breach of contract and the damage.
**Causal link (equivalence):** The damage must be a result of the breach.
**‘Foreseeability (adequacy):** The damage must be foreseeable and proximate at the time of contracting.
118
What is meant by ‘Compensation’ in contract law?
The monetary amount awarded to a party who has suffered a loss due to the other party’s breach of contract.
The goal is to place the injured party in the position they would have been in if the contract had been properly performed.
This can include:
1. Unliquidated damages
2. Liquidated damages
3. Quantum Meruit
119
What are unliquidated damages?
Damages not pre-agreed in the contract. The court decides the amount based on actual harm caused by the breach.
These include:
* **Expectation damages = lost profit:** To place injured party in the position they would have been in if the contract was properly performed.
* **Reliance damages = wasted costs:** To restore the injured party to the position they were in before the contract was signed.
120
What are liquidated damages?
A fixed amount agreed upon in the contract to be paid in case of a breach, often used when actual damages are hard to calculate.
121
What is Quantum Meruit?
A principle meaning “as much as he has deserved.”
It allows payment for services when no contract exists or price is not set, based on their reasonable value.
122
Define ‘Remidies’.
The legal solutions or actions available to a party when the other party breaches the contract.
Remedies aim to either:
1. Compensate for the loss (e.g. damages), or
2. Enforce the contract (e.g. specific performance or injunction), or
3. Cancel the contract (e.g. termination or rescission).
Main types of remedies include:
1. Damages (monetary compensation)
2. Specific performance (forcing the party to fulfill the contract)
3. Injunction (ordering a party to do or stop doing something)
4. Termination (ending the contract)
5. Rescission (cancelling and undoing the contract)
Some are only available at equity and require court approval.
123
What is the key difference between a 'Balanced termination clause’ and ‘Asymmetric termination clause’?
Balanced: Allows either party to terminate the contract if the other party commits a material breach (a serious violation of the agreement).
Asymmetric: Allows only one party to terminate the contract - typically the stronger party (e.g., the buyer or client).
124
What happens if a contract does not define termination conditions?
The court will decide whether termination is allowed, based on the type and seriousness of the breached term.
125
Why is the classification of contract terms important in common law?
Because it determines whether a breach allows the injured party to terminate the contract or only seek compensation.
126
How do common law and civil law systems differ in terms of available remedies?
**Common law: Limited remedies**, mainly damages an/or termination. In some cases, equitable remedies (like injunctions or specific performance) are granted at the court’s discretion (at equity) only if legal remedies fail.
**Civil law: Codified access to broader remedies**, including damages, termination, price reduction, and specific performance, often without needing special court discretion.
127
What is frustration in contract law? When can frustration be used as a defence?
Frustration occurs when further performance of the contract becomes impossible or pointless - e.g., due to unexpected events like natural disasters. In such cases, the contract may be terminated and the breaching party excused.
128
What is meant by a ‘limitation of liability’? Is it important in contract law?
A contract clause that restricts the amount or type of compensation one party must pay if they breach the contract.
* It can cap total damages (e.g. not more than the contract price).
* It may exclude certain types of losses like indirect damages.
* It can limit remedies, e.g. excluding termination or specific performance.
It is of utmost importance! Because it helps:
* Control financial risk for businesses.
* Set clear expectations between parties.
* Prevent excessive or unexpected claims in case of breach.
Such clauses must be clearly worded and comply with legal limits, especially in consumer contracts or under mandatory laws.
129
Name some limitations of liability.
1. Indemnification – Transfers specific risks to one party, protecting the other from certain losses.
2. Liquidated Damages – Caps liability with a pre-agreed amount for breach.
3. Warranty – Limits liability by defining exact obligations and excluding broader claims.
4. Limitation of Remedies – Restricts the types of claims or compensation allowed.
130
What two clauses state what parties do not want to be liable for?
1. Force Majeure
2. Hardship
131
Define ‘Force Majeure’.
A clause in a contract that frees parties from liability or obligation when an extraordinary event (e.g., natural disasters, war, pandemics) beyond their control prevents contract performance.
Mainly needed in common law countries.
Legal solutions for events in which the performance of a contractual obligation becomes either:
1. impossible for at least one party
2. economically unbearable for at least one party
This may lead to a request for contract renegotiation or termination.
132
Why is a Force Majeure clause especially important in common law systems?
Because common law does not recognize Force Majeure as a general legal principle. Without a specific clause, parties must rely on the narrow doctrine of frustration, which courts apply restrictively (only at equity). Therefore, Force Majeure must be explicitly included in the contract to be enforceable.
133
What are the three prerequisites for invoking Force Majeure?
1. Impossibility of performance (physical, legal, economic, or personal)
2. Unforeseeability of the event
3. No fault in prevention by the affected party
134
Define 'Hardship'.
A situation where a party to a contract faces excessive difficulty or an unfair burden due to unforeseen changes in circumstances, making it excessively onerous to perform their obligations.
This may lead to a request for contract renegotiation or termination.
135
Why must Hardship be explicitly included in contracts under common law?
Because common law does not recognize Hardship as a general legal principle. Without a specific clause, parties cannot demand renegotiation or adaptation due to changed circumstances. Therefore, Hardship must be explicitly included in the contract to be enforceable.
136
What are the three prerequisites for invoking Hardship?
1. Substantial burden on one party, making performance unreasonably difficult (e.g., extreme price or currency changes).
2. Party would not have agreed: Unreasonableness of expecting that party to continue under the original terms
3. Significant change in circumstances after the contract was formed
137
Define and distinguish Force Majeure and Hardship.
**Force Majeure** refers to events making performance **impossible** (e.g., natural disaster), while **Hardship** refers to performance becoming extremely difficult, burdensome or **unbearable economic consequences** (e.g., major price shifts).
138
What is the difference between Hardship and economic impossibility under Force Majeure?
Economic impossibility (Force Majeure) makes performance unbearable due to extreme cost but is treated as impossibility—performance is excused.
Hardship means performance is still possible but causes excessive burden, leading to renegotiation, not automatic termination.
139
How do common law systems handle situations of Hardship or Force Majeure if not contractually defined?
They rely on the doctrine of frustration, but only in extreme cases where performance is truly impossible. Courts apply it very restrictively, and it usually leads to full termination of the contract without renegotiation. Therefore, it is important to include 'Force Majeure' and/or 'Hardship' clauses in a contract under common law.
140
What are framework provisions?
The general rules that govern how the contract functions beyond the main terms.
They often include clauses on:
* Choice of law & jurisdiction (which country's law applies)
* Assignment (if rights can be transferred)
* Merger or entire agreement clauses
* No waiver (ensuring rights aren’t lost by not enforcing them immediately)
These provisions help ensure the contract is clear, enforceable, and complete.
141
What are framework provisions also called?
Boilerplate clauses
142
What are boilerplate clauses and why are they important?
A standardized provision found in most contracts.
These clauses are typically placed at the end of a contract and deal with general aspects that apply to the agreement as a whole.
* E.g. choice of law and jurisdiction
They are not specific to the particular deal, but ensure legal consistency and protection.
* Boilerplate = keep stable, thus, only slight change from contract to contract.
143
What are some framework provisions (boilerplate clauses)?
**1. Governing Law & Jurisdiction Clause:** States which country’s law and court will apply in case of dispute.
**2. Survival Clause:** Specifies which parts of the contract stay valid after termination or expiration.
**3. Confidentiality Clause:** Requires both parties to keep contract details private.
144
Define some miscellaneous clauses.
1. Dual Language Clause: To ensure that all language versions of the contract have equal legal effect and may specify which version prevails in case of conflict, helping avoid interpretation issues.
2. General Provisions Clause: To confirm the agreement is final, can only be changed in writing, may be signed in originals, requires written waivers, and states that section headings don’t affect interpretation.
145
What is the testimonium in a contract?
The final part of a contract where the parties sign the agreement.
It typically includes:
* A sentence like “In witness whereof…”
* The date and place
* The names and signatures of the parties or their representatives
It confirms that both sides agree to the terms and makes the contract official and binding.
146
**Contractual phase: Contract formation** - Terms and conditions
147
What are standarized terms? What are they used for?
Privately or publicly prepared (or used) and specifically formulated contractual terms (or group of terms) designed for repeated use in certain circumstances.
They are used to facilitate contractual agreements on certain contractual aspects.
They are not negotiable!
148
Do standardized terms have to be tailored to the contract? Why?
Yes, because they cannot clash with mandatory governing law.
149
What are the three broad categories of standardized terms?
1. General terms and conditions
2. Trade terms - private vs. public
3. Trade practice (usage/custom) - private vs. public
150
What are general terms and conditions?
Written standardized terms specifically formulated and prepared by one party designed for repeated use in certain circumstances in the future.
They are typically not adjusted and not negotiable.
151
What are private trade terms?
Written standardized terms specifically formulated and prepared by a group of parties designed for repeated use in certain circumstances in the future for use only among them.
They are often referred to by shortcuts or abbreviations.
They are typically not adjusted and not negotiable. But the parties may typically choose between various options.
E.g. Custom contract clause used by a company: “Delivery will be made at buyer’s warehouse, risk transfers upon delivery”.
152
What are public trade terms?
Written standardized terms specifically formulated and designed for repeated use in certain circumstances in the future by anyone.
They are often referred to by shortcuts or abbreviations.
They are typically not adjusted and not negotiable.
E.g. Official standardized terms like INCOTERMS by ICC: “FCA Copenhagen Incoterms 2020”.
153
What is private trade practice (usage/custom)?
Non-written standardized terms specifically formulated designed for repeated use in certain circumstances in the future between private parties.
They are typically not adjusted and not negotiable.
E.g. Internal rule used repeatedly between two business partners: Buyer always sends a confirmation email before shipment, even if not stated in the contract.
154
What is public trade practice (usage/custom)?
Non-written standardized terms specifically formulated designed for repeated use in certain circumstances in the future between anyone in the industry or trade.
They are typically not adjusted and not negotiable.
E.g. Industry-wide custom: In international shipping, Bill of Lading is commonly used as proof of delivery and title to goods.
155
How can standardized terms be validly incorporated into a contract?
They must be clearly referenced in the contract, and the counterparty must have the opportunity to review them. Actual reading is not required.
156
How can general terms and conditions be incorporated in contract formation?
If two companies uses each their own general terms and conditions, the battle of the forms applies. Either:
* (English) “last-shot” rule: a reply with material modifications is a rejection of an offer and constitutes a counter offer
* (General) "knockout" rule: conflicting terms "knock" each other out
Everything that is conflicting is left out.
157
How can trade terms be incorporated in contract formation?
* Must follow governing law requirements: Some legal systems may require the reference to be in writing.
* Terms must not conflict with mandatory law. Otherwise, they may be invalid.
* Express reference is required: Clearly name the trade term in the contract (e.g. “FCA Copenhagen, Incoterms 2020”).
* Include reference in offer, acceptance, or final contract: Ensures both parties agree to the term from the start.
* Intent to use trade terms must be clear: No room for doubt or confusion.
* Not automatically included: Unlike trade usage/custom, trade terms are not assumed and must be explicitly stated.
158
**Post-contractual phase: Obligations**
159
How do civil law and common law systems differ in handling post-contractual obligations?
**Civil law** assumes secondary operative provisions (obligations like liability) and framework provisions (e.g. confidentiality and warranty) survive contract termination.
**Common law** assumes automatic termination upon successful performance of primary obligation unless otherwise agreed upon and continued via a Survival Clause.
160
Explain the purpose and legal effect of a 'Survival Clause'.
Specifies which contract obligations continue after termination, such as confidentiality or warranty obligations.
161
What clauses may be included in a suvival clause?
1. Warranty clause: To ensure the buyer can still claim for defects discovered after performance.
2. Confidentiality clause: To protect sensitive information disclosed during the contract.
3. Non-use clause: To prevent the receiving party from using confidential information beyond the agreement’s scope.
4. Sample return or destruction clause: To require the return or destruction of confidential materials after the contract ends to ensure proper handling of sensitive information.
5. Non-competition clause: To restrict a party from competing or working for a competitor after the contract ends, usually limited in scope, time, and geography, and often require compensation.
162
**Post-contractual phase: Dispute settlement and enforcement**
163
Define ligitation.
The process of settling disputes through state courts.
It involves formal legal procedures governed by national laws, where a judge (or sometimes a jury) decides the outcome of a dispute.
Key features:
* Public and formal process.
* Governed by state procedural and material law.
* May result in binding judgments.
* Enforcement of judgments often requires recognition under state enforcement laws or international treaties (e.g. Brussels Ia, Lugano Covention or Hague Convention on Choice of Court). If these doesn’t apply, enforcement follows bilateral agreements or national laws.
* Enforcement procedure is handled under state law.
164
Define arbitration.
The process of settling disputes in a private court, outside the state court system.
It is based on mutual agreement between parties and typically used in international commercial contracts.
Key features:
* Conducted by private arbitrators (e.g., lawyers, retired judges).
* Each party may appoint its own arbitrator.
* Proceedings are confidential and often faster than court litigation.
* The result is a binding arbitral award.
* Awards can be enforced under the New York Convention in over 170 countries. If the Convention doesn’t apply, enforcement follows bilateral agreements or national laws.
* Enforcement procedure is handled under state law.
165
Compare litigation and arbitration.
**Judges**
* Litigation: Assigned by court
* Arbitration: Assigned by parties
**Speed**
* Litigation: Rather slow
* Arbitration: (usually) Faster
**Appeal**
* Litigation: Yes
* Arbitration: (usually) limited
**Foreign enforcement**
* Litigation: No uniform procedure outside Europe
* Arbitration: (almost) global enforcement regime
**Publicity**
* Litigation: Public (in part private)
* Arbitration: Private (in part public)
**Costs**
* Litigation: Court fees usually lower, but slow procedure might increase costs
* Arbitration: Tribunal fees usually higher, but fast procedure might save costs
166
What are the main advantages and disadvantages of arbitration vs. litigation?
**Arbitration:**
* Advantages: Faster, private, party autonomy (freedom to choose), and easier international enforcement.
* Disadvantages: Party autonomy, costly, and limited appeal.
**Litigation:**
* Advantages: Neutral forum, proven (long tradition), often less costly, little procedural influence of parties, and option to appeal.
* Disadvantages: Public, slower, and harder to enforce internationally.
167
What is the advantage of arbitration in terms of international enforcement?
Arbitral awards are easier to enforce internationally than court judgments.
The New York Convention provides a widely accepted framework (over 170 countries).
Limited grounds for refusing enforcement.
More certainty and global reach.
168
What are the five choices to make on arbitration in the contract? What five options can parties choose between?
1. Ad hoc (without help from insitution) vs. institutional arbitration (with help)
2. Hosting organization (if relevant, e.g. ICC)
3. Location
4. Fast track vs. normal proceedings
5. Arbitration procedure and setup of panel
169
Define the stages of arbitration.
Stage 1: Initiation - Request and acceptance
Stage 2: Arbitrator invitation
Stage 3: Arbitrator selection
Stage 4: Hearings
Stage 5: Arbitral award
170
How is the law governing an arbitration clause determined?
It can be chosen by the parties.
If not, it’s determined by the law of the seat of arbitration (lex arbitri) or the law most closely connected.
It is separate from the main contract law (Doctrine of Separability).
171
Would it be true to say that arbitration is not influenced by national law?
No, that would be false.
Arbitration is influenced by national laws at several stages:
* Validity of the arbitration agreement.
* Procedural framework (lex arbitri).
* Enforcement governed by local courts and national public policy.
* National courts may review awards under certain conditions (e.g., under the New York Convention).
172
Please comment on and elaborate on your reasoning with the statement:
“By choosing arbitration for dispute resolution and soft law as governing law, the parties of an international commercial agreement can effectively avoid state jurisdiction and state law.”
I partially agree with the statement.
Choosing arbitration allows parties to avoid state courts for dispute resolution, and selecting soft law (e.g. UNIDROIT Principles or PECL) offers a neutral and flexible alternative to national laws. This can reduce bias, increase efficiency, and promote international uniformity.
However, state law cannot be fully avoided:
* Enforcement of arbitral awards requires state courts and is subject to national laws (e.g. under the New York Convention).
* The lex arbitri (law of the seat of arbitration) still governs procedural aspects.
* Public policy rules of the enforcement country may override soft law principles.
* Some mandatory laws (e.g. anti-corruption, competition law) apply regardless of the chosen governing law.
Thus, while arbitration and soft law reduce reliance on state systems, they do not eliminate it. Parties still operate within a broader legal framework that includes state jurisdiction and law at key stages.
173
Do you agree or disagree with the statement:
“Once the parties of an international commercial contract agree to an arbitration clause, the only law applicable to the contract and in disputes between the parties is the law chosen by the parties in the choice-of-law clause”
Please state your reasons.
I disagree with the statement.
Although the choice-of-law clause determines the substantive law governing the contract, it is not the only applicable law in arbitration.
Other legal layers apply:
* Lex arbitri – the law of the seat of arbitration governs the arbitration procedure (e.g. how arbitrators are appointed, what procedural rights parties have).
* Arbitration rules – such as ICC or UNCITRAL rules, also shape the proceedings.
* Public policy of the enforcement state – courts may refuse to enforce an arbitral award if it violates local public policy (under Article 5 of the New York Convention).
Furthermore, the arbitration clause itself is treated as separable from the main contract and may be governed by a different law than the one chosen for the rest of the contract.
In conclusion, multiple legal frameworks may apply, and the choice-of-law clause alone does not govern the entire dispute.
174
Can you take the enforceability of judgements in foreign countries for granted?
No, enforcement is not automatic.
Depends on international treaties (e.g., Brussels Ia, Lugano, Hague Conventions) or bilateral agreements.
If no treaty applies, enforcement relies on national laws and often requires an exequatur procedure.
Local courts may refuse recognition due to jurisdictional, procedural, or public policy issues.
175
Under what conditions can an arbitral award be refused enforcement?
Under Art. 5 of the New York Convention, enforcement can be refused for reasons like:
* Invalid arbitration agreement
* Improper notice
* Tribunal acting beyond powers
* Award conflicts with public policy
* Non-arbitrable subject matter
176
Explain the role of the New York Convention in cross-border arbitration.
It provides a framework for the recognition and enforcement of foreign arbitral awards. Over 170 countries are parties. It ensures almost universal enforceability of awards, unless grounds for refusal under Art. 5 exist.
