Private International Law

In international trade, conflicts arise because of different systems of commercial law in various countries, which leads to the so-called conflict of laws.

 

For example, when dealing with a trade dispute, each country’s judicial system works on different principles. Which country’s law should be applied? This, in turn, is another issue of the application of law.

 

For example, can an offer be withdrawn or modified after it reaches the offeree? Each country has different legal principles addressing this issue.

 

For example, following the laws of United Kingdom, Hong Kong laws argue that an offer can be withdrawn at any time before it is promised. In other states, however, such as France, it was argued that it could not be revoked within the validity period prescribed by it. It is clear and true that these are two completely opposing propositions.

 

If the parties have conflict on whether the offer can be withdrawn, with a variety of legal claims across different countries, litigation in different countries may lead to completely different results. In order to avoid such an outcome, in the long-term practice of international trade, there are also some principles to resolve these conflicts of laws. These principles are:

 

A. Choosing the legal clause

 

The principle of choosing the legal clause refers to: to avoid conflicts in the contract between the parties, an agreement must be made before signing the contract regarding what law will be used when there is a dispute. The agreement is referred to as the applicable law clause. For example, “This contract shall be governed by The Laws of Hong Kong”. Then the law of Hong Kong is the sole basis for resolving the dispute over the contract.

 

However, in order to prevent businessmen from abusing such provisions for obtaining an improper advantage, national laws also impose a number of restrictive provisions on the use of such provisions by businessmen. Generally, the parties must be well-intentioned and lawful in entering into such a clause. If the court finds that the legal choice made is contrary to the state or public policy, the court may declare the choice null and void.

 

For example, it is unlawful to make a legal choice aiming at tax evasion or evasion of legal control, then the court could declare the choice null and void on the basis of established evidence. This is often the case when a party attempts to violate laws or decrees on taxes, import and export quotas, import and export bans, foreign exchange controls, etc. in order to obtain illegal and improper benefits.

 

B. Choosing the law most closely related to the contract

 

When the parties have a dispute over a trade contract which does not provide for a choice clause, according to the international conflict of laws, the law most closely related to the contract will be chosen, such as the law of the place where the contract was concluded, the law of the place where the contract was performed, the law of the place of arbitration, and so on.

Which national law is most closely related to the contract? It should be determined by analysing all relevant circumstances of the contract. In making such a judgement, the Tribunal generally has many factors to consider, including where to conclude the contract, where to perform the contract, where to arbitrate, which letter and form to be used in the contract and what content of the terms should include. The most common cases are:

 

1. The presumption of the law applicable to place of contracting

 

The current private international law generally assumes that if the parties entered into a contract at the same country as where the contract is performed, the Form of the contract, the Construction of contract, and the Effectiveness of contract may be presumed to be governed by the law of that state.

 

2. The presumption of the law applicable to the place of performance

 

If the place of contract formation is not in the same as the place of the executing the contract, in the event of a dispute relating to the fulfillment, the law applicable to the place of execution is generally presumed.

 

3. The presumption of the law applicable to the place of arbitration

 

If the parties have entered into an arbitration agreement, from which they may determine the place of arbitration, when dealing with dispute, unless otherwise specified, it may use the law applicable to the place of arbitration.

 

C. United Nations Convention on Contracts for the Sale of International Goods – CISG

 

The main obligation of seller is to deliver products while for buyer it is to pay the price. The provisions of the United Nations Convention are compared with the Hong Kong Trade in Goods Ordinance as follows:

 

1. Obligations of sellers

1.1 Time of delivery

 

The United Nations Convention on Contracts for the Sale of International Goods states that:

 

I. If the contract of sale involves the transportation of the goods, the seller shall hand the products over to the first carrier for delivery to the buyer.

II. If the goods in the contract are either specific goods which are extracted from a particular inventory or unspecified goods to be manufactured or produced, with a particular place specified at the time of contract or a specified place for manufacturing or producing, the seller should place the goods at that particular place at the disposal of the buyer.

III. In other cases, the seller should deliver the goods to his/her business address when they made the contract.

IV. If the contract provides for a date, or if a date can be determined from the contract, delivery should be made on that date. If the contract has a period of time, or if a period can be determined from the contract, delivery should be made at any time during that period. If no time is set, delivery is made within a reasonable period of time.

V. If the seller is obliged to hand over documents relating to the goods, he/ she must hand them over in accordance with the time, place and manner specified in the contract.

 

The Hong Kong Sale of Goods Ordinance states that:

I. The place of delivery is generally the seller’s place of business, or the seller’s residence in the absence of a business place. If it is a specific item in the contract and at the time of the contract both parties are aware that the goods are stored in a place, delivery shall be made at that storage place.

II. If the contract stipulates that the seller must deliver the goods to the buyer, but does not specify the time of delivery, the seller should deliver the goods within a reasonable time.

III. If the goods were under the control of a third party at the time of sale, the seller could not be considered to have delivered the goods unless the third party admitted to the buyer that he was keeping the goods on behalf of the buyer.

IV. The request for delivery or receipt must be made within a reasonable time.

V. Unless otherwise specified, the cost of placing the goods in a deliverable state shall be borne by the seller.

 

1.2 Quantity of delivery

 

The United Nations Convention on Contracts for the International Sale of Goods provides that:

The quantity delivered by the seller must be in accordance with the contract, and if the quantity of goods delivered by the seller is greater than the quantity stipulated in the contract, the buyer may collect the county division in accordance with the contract and refuse to collect the county division exceeding the contract, or collect the goods in whole, but pay for the excess of the contract at the price stipulated in the contract.

 

The Hong Kong Sale of Goods Ordinance states that:

 

I. If the quantity of goods delivered by the seller is less than the agreed quantity, the buyer may refuse to receive the goods, but the buyer should pay the agreed price if receiving the goods.

II. If the seller delivers more goods than agreed, the buyer may accept the agreed part and refuse the extra portion, or reject it all.

III. Point ii of the Hong Kong Goods Ordinance is inconsistent with most regional and United Nations conventions and is also a common law national provision. If the contract is strictly enforced, that makes sense. If from a realistic point of view, it is inevitable that it is reasonable. Such a provision is therefore inflexible.

 

1.3 Quality of delivery

 

The United Nations Convention on Contracts for the International Sale of Goods states that:

 

1. The goods delivered by the seller must be in accordance with the quantity, quality and specifications specified in the contract and shall be boxed or packed in the manner specified in the contract.

II. Unless otherwise agreed by the parties, the goods are incompatible with the contract unless they meet the following requirements:

a. The goods apply to the purposes commonly used by the goods with the same specification.

b. The goods apply to any special purpose for which the seller was notified, expressly or implicitly, at the time of the conclusion of the contract.

c. The quality of the goods is the same as the sample or style provided to the buyer by the seller.

 

The Hong Kong Sale of Goods Ordinance states that:

 

I. Contracts for the sale and sale of samples shall contain an implied condition, including:

a. The goods delivered by the seller shall conform to the sample in quality.

b. There can be no imperfections that are not commercially available.

c. A contract stating the sale and purchase shall contain an implied condition that the goods shall be consistent with the description.

 

1.4 Guarantee of rights in goods

 

The United Nations Convention on Contracts for the International Sale of Goods states that:

 

The guarantee of the seller’s rights is primarily that the goods delivered by the seller must be goods that a third party cannot claim or claim. At the same time, the seller delivers the goods unless the buyer agrees to take them under such rights or claims. At the same time, the goods delivered by the seller must be goods that a third party cannot claim any rights or claims under industrial or other intellectual property rights, to the extent that the seller knew or could not have been unaware of at the time of the conclusion of the contract.

 

The Hong Kong Sale of Goods Ordinance states that:

I. Its provisions are similar to those of the United Nations Convention and are primarily guaranteed by the seller in three areas:

II. The seller guarantees ownership of the goods it sells, i.e. possession, use and disposal.

III. Seller warrants that there is no security interest, lien or other burden on the goods delivered.

IV. The seller guarantees that the goods sold by it do not infringe the rights of any third party, mainly industrial and other intellectual property rights.

 

2. Obligations of buyers

 

The buyer’s obligation is generally to receive the goods on time and in the specified manner and to pay the agreed price.

 

The United Nations Convention on Contracts for the International Sale of Goods states that:

 

The buyer must pay the price and receive the goods in accordance with the terms of the contract and the convention. In terms of payment of the price:

 

I. If the buyer is not obliged to pay the price at any other place, he must pay the seller the price at:

i. seller’s place of business, or

ii. If the price is paid on the basis of the transfer of the goods or documents, the place at which the goods or documents are handed over.

II. The seller must bear the costs associated with the increase in the payment of changes in its place of business following the conclusion of the contract.

 

Or

 

I. If the buyer is not obliged to pay the price at any other specified time, he must pay the price when the seller hands over the goods or the documents controlling the disposition of the goods to the buyer in accordance with the contract and this Convention. The seller may pay the price as a condition for the transfer of the goods or documents.

II. If the contract relates to the carriage of goods, the seller may, after paying the price, transfer the goods or documents controlling the disposition of the goods to the buyer as a condition for the shipment of the goods.

III. The buyer is under no obligation to pay the price until there is an opportunity to inspect the goods, unless such an opportunity conflicts with the delivery or payment procedures agreed upon by the parties.

In terms of receiving goods:

I. Take all expected actions with a view to enabling the seller to deliver the goods. and

II. Accept the goods.

 

The Hong Kong Sale of Goods Ordinance states that:

“Unless otherwise agreed, the delivery of the goods and the payment of the price are on a convective condition, i.e. the seller must prepare the goods and voluntarily transfer them to the buyer in exchange for payment, while the buyer must prepare the price and voluntarily pay them to the seller in exchange for the goods.”

At the same time, there are clear provisions on the buyer’s obligation to receive the goods:

“When the goods are delivered to the buyer, if he has not previously inspected the goods, he cannot be considered to have accepted the goods unless he has a reasonable opportunity to test them to determine whether they are in conformity with the contract.

Unless otherwise agreed, when the seller offers delivery to the buyer, at the buyer’s request, the seller shall provide the buyer with a reasonable time to examine the goods in order to determine compliance with the terms of the contract.”

From the above-mentioned provisions, the provisions of the United Nations Convention are basically consistent.

D. Remedies for breach of contracts

 

United Nations Convention on Contracts for the Sale of International Goods:

 

There are two categories of breach, namely Fundamental breach and Non-fundamental breach. The former injured party may claim the cancellation of the contract, while the latter injured party may claim damages or other remedies, not the cancellation of the contract.

 

What is a fundamental breach of contract? According to the United Nations Covenant, “if a party breaches the contract as a result of a loss suffered by the other party, thereby effectively depriving him of what he is entitled to expect under the terms of the contract, that is, a fundamental breach of contract …” Non-compliance with this standard is called a non-fundamental breach of contract. For non-fundamental breach of contract, the injured party may claim damages.

 

The Hong Kong Sale of Goods Ordinance:

 

Breaches are classified differently, i.e. by terms of contract, into Condition and Warranty.  If the conditions are violated, the injured party may claim the cancellation of the contract; if the warrant violated, the injured party can only claim damages, but not cancellation of contract. This classification is very different from the United Nations Convention.