Contracts Common Law

The Rome Convention, now the Rome Regulations, supervened common law. The 1980 Rome Convention was updated and replaced by the Rome Regulation. It  applies to  contractual obligations in civil and commercial matters.

A contract is an obligation freely assumed. It applies to contracts made after its commencement date. Rome II covers noncontractual obligations.

The Rome I Regulation applies to contracts made after 17 December 2009 unless the Regulation provides that it is specifically excluded from its scope. It applies to cases involving contractual obligations in civil and commercial matters where there is a conflict or choice of law between difference countries / jurisdiction. It is to be interpreted in accordance with its common EU meaning. It has its own principles as interpreted by the EU courts, separate from the laws of the national courts.

Common law rules applied to applicable law prior to the EU rules. They may continue to apply in some limited contexts not covered by the EU Regulation.

The proper law of the contract is that expressly or impliedly chosen by the parties. If none have been chosen it was the law with which the contract has the closest and most real connection.

The place of performance can be an issue in relation to issues such as illegality. Public policy issues in the law of the state may be relevant.

The capacity of the parties may affect the validity of the contract. Formerly the domicile of the party was emphasised, but the proper law is now more commonly employed. The place where the contract was made may apply as regards, formalities. However apart from specific instances such as these, the proper law of the contract governs almost all issues contractual in nature.

Parties can choose the applicable law. This was nearly always respected and enforced, unless consumer protection type rules apply, where a choice of law could not be enforced by the more powerful party.

The EU legislation replaced domestic rules on applicable law. Unlike the provisions in relation to enforcement and recognition, it is not dependent on the domicile or residence of the other party being within the European Union. The EU rules apply in respect of most contracts and contractual relationships.

They do not apply to

• status and the capacity of natural persons
• contractual obligations relating to will, succession, rights in property arising from matrimonial relationship
• rights and duties arising out of the family relationships, marriage or affinity including maintenance obligations of children who are not legitimate
• obligations arising under bills of exchange, cheques, promissory notes and other negotiable instruments to the extent that the obligations arise out of their negotiable character
• arbitration agreements and agreement on the choice of court
• questions relating to the organisation of companies or bodies corporate such as creation, registration, capacity, internal organisation winding up
• liability of officers and members for obligations
• whether an agent has capacity to bind the principal or organ has authority to bind a company
• constitution of trust and relationship between trustees and beneficiaries
• evidence and procedure.
• property
• intellectual property.
• insurance contracts arising out of operations carried out by organisations, the object of which is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work.

It does not apply when the law concerned is manifestly inconsistent with the public policy of domestic law. A domestic statutory prohibition may apply asmatter of interpretation in respect of matters within the jurisdiction.

At common law, contracts are governed by the proper law of the contract. This might be determined by express selection inferred in the circumstances or decision as to which jurisdiction has the closest and most real connection

Most contractual issues are governed by the proper law of the contract. The domestic rules of the foreign jurisdiction are applicable not its conflict of laws rules.

The capacity of an individual is governed by the law of the country with which the contract is most closely connected or by the law of the domicile of the person concerned. If the person has capacity under either of these laws the contract will be valid in relation to capacity.

A commercial contract was valid at  common law if it complies with the formal requirements of the place of contracting. In the case of land, the requirements of the law of the place where the land is situate must be complied with.

The essential validity of the contract is determined by the proper law of the contract. Performance is governed by the proper law as are. excuses governing non-performance.

A contract which by its proper law is void or illegal will not be enforced. This is so even if illegality is based on the revenue or public laws of the state concerned.

A contract which is illegal where it is to be performed might not be enforced at common law. However if the home state  is not the proper law. this may not be applicable. As a general principle at common law the validity and enforceability of a domestic contract is not affected even if the laws of the place of performance give either or both parties an excuse for nonperformance without rendering it illegal.

Regardless of the proper law a contract may be unlawful by domestic statute. If  as a matter of construction the domestic statue it applies and has effect outside the territory it will not be enforced by the domestic courts.