LAWS2018 Private International Law A
COMPLETE SUMMARY
Semester 1, 2023
13. Choice of law in contract
● Identification of applicable law (at the time the contract is made):
○ 1. Determining intent of parties : Akai (HCA 1996) ■ Express choice of law?
■ If no express choice of law - inferred (actual but unexpressed) choice of law? Construction of contract and surrounding circumstances ○ 2. If no express or inferred choice - objectively determine the proper law ● Parties can choose to change the governing law by agreement
Express choice of law:
● Parties generally free to choose the legal system that governs their contractual relationships : Merwin v Moolpa (HCA 1933), Vita Food Products (PC 1939)
● Requirement of bona fide choice ( Vita )?
○ Only if the attempted selection of the law was for no other purpose than to avoid the operation of a fiscal or policy provision of the law which would otherwise apply to the contract: Golden Acres v Queensland Estates (QSC 1969), BHP Petroleum v Oil Basins (VSC 1985)
○ Choice does not need any connection with contract: BHP v Oil Basins Inferred choice of law:
● Construe contract as a whole and surrounding circumstances to determine whether the “court properly may infer that the parties intended their contract to be governed by reference to a particular system of law” : Akai
○ No limit on factors that might assist the court to draw inferences
○ “Objective framework of facts” within which the contract came into existence ○ Also consider: implied terms (e.g. “gleaned from a number of documents,
conversations or business dealings over a period of time”): Codelfa (HCA 1982), Mason J
● If contract and surrounding circumstances “ ineluctably point to agreed choice of law ”: Amin Rasheed Corp v Kuwait Insurance (HoL 1984)
○ e.g. contract itself - policy included terms which could not be understood without reference to UK Act
○ e.g. surrounding circumstances - broker in London, claims settled in London, no indigenous marine insurance of Kuwait
● Exclusive jurisdiction clause creates very strong presumption that parties chose the law of that country : Akai , unless it should not be applied, e.g.
overwhelming connection with legal system other than that of the selected forum:
Lewis Construction v M Tichauer (VSC 1966)
○ But not other way around: choice of law clause (which also governs validity, performance, discharge) cannot imply choice of jurisdiction: Dundee v Gilman (NSWSC 1968)
Objectively determining proper law:
● Test : “ the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connection ”: Bonython v Cth of Australia (PC 1951), Viscount Simonds
○ e.g. dispute over whether amount to be paid in English or Aus pounds - what currently constituted legal tender in the legal system that comprised the proper law of the contract in 1895? - law of Qld
● Also: “ legal centre of the gravity of the contract ”: Akai
● Factors including: “ place of contracting , the place of performance , the place of residence or business of the parties respectively, and the nature of the subject matter of the contract ”: Re United Airways of the Havana and Regla Warehouses (Ch 1960), Jenkins LJ
○ Also relevant: language, currency, “principle of validation” (presume parties want a valid contract)
○ Place of contract may be irrelevant if “mere matter of chance”
● Case studies: Bonython, Akai, Oceanic Sun (HCA 1988), Wilson and Toohey JJ Renvoi in contract:
● Look to substantive law of country, excluding any renvoi , whether remission (back to other country) or transmission (to third country): Amin Rasheed
○ e.g. if contract made in England governed by French law: English court would apply French substantive law, notwithstanding that if the matter were litigated before a French court, French court applying its own conflict rules might accept a renvoi to English law as the lex loci contractus
● No renvoi in contract in NSW : Gonzalez (NSWSC 2017), Proactive Building Solutions v Mackenzie Keck (NSWSC 2013)
Capacity:
● Whether individuals have capacity governed by proper law of contract : Homestake Gold of Australia v Peninsula Gold (NSWCA 1996)
● Legal capacity of corporation to contract governed by law of place of
incorporation : Foreign Corps (Application of Laws) Act 1989 (Cth) s 7(3)(a) , follows CL principle: Carl Zeiss Stiftung (AC 1967) , e.g. PT Ltd v Maradona (NSWSC 1991) Formation (consent, offer, acceptance):
● Seems to be law of the forum : Oceanic Sun , Brennan and Gaudron JJ (obiter), Trina Solar (FFCA 2017)
○ “all questions which are necessarily antecedent to a determination of the proper law of a contract must fall for answer in accordance with the lex fori”:
Oceanic Sun , Gaudron J (obiter)
○ [Other options: putative proper law of contract: White Cliffs (NSWSC 1904) , place of contracting: Oceanic Sun , Deane J (obiter) (but problems)]
Consideration: Whether consideration is a necessary element of a binding contract is determined by the putative proper law of the contract : e.g. Re Bonacina (Ch 1912) Formal validity (e.g. Statute of Frauds): Proper law of the contract : e.g. Tipperary Developments (WASCA 2009) (factors favour WA law not NSW)
Performance, variation and discharge: Proper law of the contract governs substance of contractual obligation, as well as performance (and non-performance), variation and discharge of contract : e.g. Jacobs, Marcus & Co (ECA 1884), Merwin v Moolpa
Illegality and forum public policy:
● e.g. enforcement of Bahamas gambling debt (void under law of Vic) not contrary to forum public policy: Paradise Enterprises v Kakavas (VSC 2010)
○ i.e. enforcement was legal under proper law of contract (Bahamas), so potentially enforceable in forum
Illegality in place of performance:
● Contract invalid due to illegality, if the real object and intention of the parties is to perform some act which is illegal by the law of a foreign country ,
notwithstanding that there may be alternative modes/places of performing which permit contract to be performed legally: Foster v Driscoll (EngCA 1929)
○ e.g. refused to enforce contract about purchasing boat to illegally smuggle whisky into USA during prohibition
● Aus courts (i.e. lex fori ) will not enforce contract which, though lawfully made in Aus, was made for the purpose of violating the laws of a friendly country : Fullerton Nominees v Damargo (WASCA 2000)
○ e.g. reimbursement of bribes against Indonesian law
Discharge for frustration by supervening illegality and impossibility of performance under foreign law : PT Arutmin Indonesia v PT Thiess Contractors Indonesia (QSC 2013)
● Unless: contract has sufficiently provided for what happens in this event
● e.g. contract anticipated supervening events, such as change of law, which affected illegality and performance of contract
Foreign public policy and international comity:
● Forum will not enforce contract that violates public policy of place of performance : Lemenda Trading v African Middle East Petroleum (QBD 1998)
○ e.g. D engaging P to use personal influence to secure contract renewal was against public policy of Qatar (place of performance and closest connection), which had same public policy as England (on general principles of morality) ○ i.e. contrary to forum public policy, AND also same public policy applies
to country of performance
