INTERNATIONAL CONTRACT
LAW
• Topics Covered in Chapter on International
Contract Law
– Comparative Law in Negotiations
– Generally Recognized International Principles
in Commercial Law
– National Contract Law of Various Nations
– UNIDROIT Principles of International
Commercial Contracts
NEGOTIATIONS
• Differences in Negotiation Styles Among Nations
– Language and Cultural Differences Affects
Negotiations
• Confucius philosophy of “harmony” influences negotiations in
Japan
– Japanese “wa” concept is reflected in the Japanese negotiation
style by placing an emphasis on developing a trusting long term
relationship.
» In Japan, there is an aversion to litigation and emphasis on
contracting parties working out differences among
themselves
» Decisions are based on “ring-sho” consensus.
NEGOTIATIONS
• Factors that must be taken into consideration in
cross-cultural negotiations
– That the negotiations lead to a written contract that is
enforceable in the countries of both parties.
– Conflicts that result from cross-cultural
misunderstandings can be avoided if both parties
understand their respective rights and duties.
– Dispute resolution system should be completely and
fairly addressed.
RECOGNIZED PRINCIPLES
OF COMMERCIAL LAW
• Sources of International Commercial Law
– Customary International Business Law
• International Chamber of Commerce Uniform Customs and
Practices for Documentary Credits addressing Letters of Credit
– International Commercial Arbitration Decisions
• Arbitration decisions are based on the application of
international commercial law
– Conventions and Treaties
• United Nations Convention on the International Sales of Goods
which has been incorporated into the national law of many
nations.
RECOGNIZED PRINCIPLES
OF COMMERCIAL LAW
• Harmonization of Commercial Law
– Good Faith Principles-adoption of nachfrist notice in
which a party request an extension of additional time.
– Contract Interpretation-reason to know and should
know contractual obligations. Common among nations
to provide judicial interpretation (should know) v
obligation to know on individual basis (reason to
know).
– Exculpatory Clauses generally unenforceable among
nations if unfair to the contracting party.
RECOGNIZED PRINCIPLES
OF COMMERCIAL LAW
• Harmonization
– Liquidated Damage Clause generally
enforceable among nations
• Differences Among Nations
– Law in Fact and Law in Action varies among
nations.
• Islamic nations use of the Shari’a is a body of
religious principles that governs secular contractual
transactions
NATIONAL CONTRACT LAW
• Russian Civil Law-similar to common law
contract law.
– Article 158 allows silence in acceptance if prior
relationship.
– Article 160 applies Article 2 of UCC in terms of
statutes of fraud.s
– Section 428 applies common law adhesion provisions.
– Article 162 applies writing requirement for statute of
frauds in common law.
– Section 451-material changes circumstances which are
similar to common law.
NATIONAL LAW
• Russia
– Preliminary Contract are not enforceable. Contract
must be complete.
– Section 469-implied warranties of merchantability and
particular purpose applied along with price reduction
remedy.
• China
– Foreign Economic Contract Law
• Law divides contract law into general provisions, formation,
performance and remedies, transfer and assignments,
modification and miscellaneous provisions
NATIONAL LAW
• China-continued
– Article 17 is a version of the American concepts of
anticipatory repudiation and adequate assurance.
– Article 19 adopts Hadley v. Baxendale limitation on
damages.
– Article 20 is similar to the American law on liquidated
damages.
– Article 22 adopts common law’s principle of mitigation
of damages.
– Article 24 and 25 recognizes excuse of force majeure.
– All contracts must be in writing under Chinese Law.
NATIONAL LAW
• China-continued
– Article 32 requires that recission and
modification be in writing.
– Article 12 requires the certainty of terms in the
offer.
– Article 37 recommends the alternative disputes
resolution system of arbitration and mediation.
– The Foreign Contract Law of China provides
that the statute of limitation is four years.
NATIONL LAW
• European Contract Law
– European Union’s Commission on Contract published
the “Principles of European Contract Law”.
• Quite similar to the common law of contracts and Uniform
Commercial Code in the United States.
– Contractual existence may be proven by any means including
testimony of witnesses.
– Modifications must be in writing.
– Merger clauses similar to UCC.
– Notice is effective when it reaches offeror.
– Advertisement could constitute offer if certain information
included.
– Firm Offers are irrevocable for an extended time.
NATIONAL LAW
• European Community
• Principles of European Contract Law-continued
– Mail Box Rule rejected.
– Additional Terms of the Acceptance quite similar to Article 2 of
the Uniform Commercial Code in United States.
– Pre-Contractual Liability applicable in European Community.
Parties have a general duty to negotiate in good faith. Failure to
do so can result in pre-contractual liability. Not applicable in
United States.
– Each party has an affirmative duty not to disclose confidential
information.
– Obligation of contracting parties to disclose agency relationship
NATIONAL LAW
• European Community
– European Principles of Contract Law-continued
• Party has right to avoid contract due to mistake,
fraud, unfair advantage and unconscionability.
• Adopts principle of nachfrist notice and extension of
time to perform.
• Recognizes unforeseeable impediments that may
excuse performance.
• Specific performance is a remedy.
• Reduction in price is an available remedy.
UNIDROIT’S PRINCIPLES ON
INTERNATIONAL COMMERCIAL LAW
• Recommended Principles on International
Contract Law by UNIDROIT
– Similar to Uniform Commercial Code of United States
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Open Terms in Offer
Pre Contractual Liability
Hardship Excuses for Performance
Promissory Estopple applied to Pre-contractual liability
Failure to negotiate in good faith can lead to pre-contractual
liability.
– Party may recover damages and incidental expenses associated
with pre-contractual liabilty