UNIT V

Lex causae – the law which governs an issue.

Lex domicilii – the law of a person’s domicile.
Lex fori – the law administered by the court hearing the case. English law is the lex fori
for an English court.
Lex situs – the law of the place where property is situated.
1. CONCEPT AND VALIDITY OF CONTRACT IN PRIVATE
INTERNATIONAL LAW
The concept of the applicable law of a contract, which has been known to the English courts
as the ‘proper law’, The Contracts (Applicable Law) Act 1990
The basic rules for the ascertainment of the applicable law are contained in Articles 3(1)
and 4(1) of the Rome Convention, which provide that a contract ‘shall be governed by the
law chosen by the parties. Their choice must be express or demonstrated with reasonable
certainty by the terms of the contract or the circumstances of the case’, failing which, ‘the
contract shall be governed by the law of the country with which it is most closely
connected’.
All this bears resemblance to the English courts’ approach, as set out in the speeches of
Lords Diplock and Wilberforce in the leading case, Amin Rasheed Shipping Corporation
v. Kuwait Insurance Co., [1984] AC 50 HL which concerned a contract contained in an
insurance policy. The former judge said: “The first step is to examine the policy to see
whether the parties have, by its express terms, or by necessary implication . . . evinced a
common intention as to the system of law by reference to which their mutual rights and
obligations under it are to be ascertained.”
Lord Wilberforce added that if no intention is expressed and none can be inferred, then, “it
is necessary to seek the system of law with which the contract has its closest and most real
connection”. This is called imputed applicable law.
1.1 Express choice of law
Article 3(1) of the convention clearly treats an express choice of law as conclusive. This
reflects the English traditional view as expressed by Lord Wright in Vita Food Products
Inc. v. Unus Shipping Co. [1939] AC 277 PC. It rejects claims which have been advanced
by writers that the principle of the parties’ autonomy is limited by a doctrine whereby
parties are not allowed to evade the application of the rules of a system of law which they
do not like by resorting to another system. No such general doctrine of evasion of law exists
in English private international law.
Article 3(3) allows for the possible application of rules of some other system and goes
some way to prevent evasion of what are called ‘mandatory rules’, but this does not
altogether nullify the parties’ selection of a law to govern their contract; indeed it confirms
their freedom of choice. It also confirms that the chosen law need have no connection with
the contract.
1.2 Inferred choice of law
Article 3(1) provides that if the parties have not expressed a choice of law example: ‘this
contract shall be governed by French law’, such a choice must be ‘demonstrated with
reasonable certainty, by the terms of the contract or the circumstances of the case’. This is
conceptually distinct from the imputed choice of law which operates in the absence of an
express or inferred choice and is envisaged by Article 4(1).
A previous course of dealing under contracts containing a choice of law clause, whose
omission from the instant contract is not the consequence of a decision to change the
parties’ policy; a choice of court or arbitration clause.
A reference to rules of a particular system of law, example: the inclusion of provisions of
the French Civil Code; an expressly chosen law to govern related transactions. The English
courts have sometimes, but not always, drawn an inference from such factors as the
currency and place of payment, the status of the parties and from the supposed intention of
the parties to create or include a valid contract or term thereof, such as an exemption clause.
If no inference can be drawn, the Court will have to resort to the rules in Article 4 of the
Convention.
1.3 Consent of the parties to the choice
Article 3(4) of the Convention provides that the existence and validity of the consent of the
parties to the choice of the applicable law shall be determined in accordance with the
provisions of Articles 8 (existence and material validity), 9 (formal validity) and 11 (a case
of incapacity).
1.4 Mandatory rules
Article 3(3) of the Convention limits the application of the chosen law by providing that
this ‘shall not, where all the other elements relevant to the situation at the time of the choice
are connected with one country only, prejudice the application of rules of the law of that
country which cannot be derogated from by contract’.
The purpose of this provision is to prevent evasion of mandatory rules of law where what
is fundamentally a domestic contract is turned into a conflicts case solely by virtue of the
parties’ choice of a foreign law to govern their contract.
Illustration: If what is entirely a Dutch contract containing a clause which offends a
mandatory rule of Dutch law is expressed to be governed by French law, an English court
must apply the Dutch rule to that clause.
The law of the country with which all the relevant connections exist must be examined to
see whether the rule is one which cannot be derogated from by contract.
2. VALIDITY OF CONTRACT – MATERIAL AND FORMAL
2.1 Formal validity
Whether a contract is void for non-compliance with a rule of law that it must be concluded
in a certain form.
The Rome Convention (Article 9), which does not define formal validity, adopts:
(1) A contract concluded between persons who are in the same country is valid if it satisfies
the formal requirements of the applicable law or of the law of the country where it was
concluded.
Illustration: A and B when in France conclude there a contract governed by English law,
the contract is valid if it conforms with the formalities of either French or English law.
(2) Where persons are in different countries, the contract is formally valid if it is so by the
applicable law or by the law of either of those countries.
Illustration: A in Germany and B in France conclude a contract governed by English law,
the contract is valid if it conforms with the formalities of German, French or English law.
(3) Where a contract is concluded by an agent, the country where the agent acts is the
relevant country for the purposes of (1) and (2).
A contract regarding a right in immovable property or a right to use it (e.g. a tenancy) is
subject to the mandatory requirements of the lex situs if it imposes them irrespective of
where the contract is concluded and of the applicable law
2.2 Material validity
Article 10(1) of the Convention sets out five matters which in particular are governed by
the applicable law determined in accordance with Articles 3 to 6 and 12. The fifth, ‘the
consequences of nullity of the contract’, being regarded in English and Scots law as a quasi-
contractual and not a contractual matter, was made the subject of a permitted reservation
by the United Kingdom and does not have the force of law in the United Kingdom.
(a) Interpretation
This represents the English rule. If the parties have selected one law to govern the contract
and another to interpret its terms, the latter will be employed to construe the contract, since
this method of ‘splitting’ the contract is permitted by Article 3(1). However, if the question
is as to the meaning of a currency, example, what are Dutch guilders, this surely must be
determined by the law of the country whose currency is referred to.
(b) Performance
Since to perform a contractual obligation is merely one way of obtaining one’s discharge
from and extinguishing such an obligation, performance could well have been included in
another category.
(c) Consequences of breach
The Convention’s words are ‘within the limits of the powers conferred on the court by its
procedural law, the consequences of breach, including the assessment of damages insofar
as it is governed by rules of law’.
This includes such matters as ‘the liability of the party in breach, claims to terminate the
contract for breach and any requirement of service of notice on the party to assume his
liability’. It has been the rule of English common law that remoteness of damage and heads
of damage are matters of substance, governed by the applicable law. This is confirmed by
Article 10(1)(c).
However, the assessment or computation of the damages is procedural and governed by
the lex fori. This seems to be modified by the Convention and the applicable law will apply
in so far as that law regards the matter as governed by rules of law. The remedies available
under the applicable law, such as damages or specific performance, will have to be granted
by the English courts. But if English procedural law does not allow a certain remedy, for
example, periodical payments or, in the particular situation, specific performance, such
remedies need not be awarded.
(d) The various ways of extinguishing obligations, and prescription and limitation of
actions
At English common law the applicable law decides whether a contractual obligation has
been discharged by frustration or breach or by novation (by which one party is discharged
from his obligations and succeeded by another person) or whether a moratorium, allowing
of delay, can postpone performance. This is clearly the situation under the Convention.

3. CAPACITY TO CONTRACT
Capacity of a natural person to contract is excluded from the Convention. This is because
under the laws of most European countries capacity is a matter of status rather than of
contract. The common law conflicts rules continue to apply.
However, a relevant provision is Article 11, which says that where a contract is concluded
between persons who are in the same country a person can only invoke his incapacity under
the law of another country if, at the time of contracting, the other party was aware or would
have been aware of it had he not been negligent.
What law governs the capacity of a natural person to conclude a commercial contract is a
matter for some speculation, for there is a dearth of English authority on the point.
There are several possibilities. The governing law may be
(1) That of the domicile of the person alleged to be under the incapacity;
(2) That of the place of contracting;
(3) The law applicable to the contract.
Application of the first could work unjustly towards the other party and the second is
unsatisfactory if the place of contracting is ‘fortuitous’.
Only two English cases touch on the point. In the early case, Male v. Roberts, (1800) 3
Esp. 163, the decision appears to be equally consistent with the law of the place of
contracting and with what would now be called the proper law.
In the much more modern case, Bodley Head v. Flegon, 4 [1972] 1 WLR 680 which
concerned the copyright in Alexander Solzhenitsyn’s novel, August 1914, the author had
signed in Moscow a power of attorney authorising a Swiss lawyer to deal in the author’s
works outside the Soviet Union. It was argued that the author had no capacity under Soviet
law, the law of the place of contracting and of his domicile, to contract with the lawyer.
The argument was rejected on the ground that Russian law had not been shown to have the
effect contended for, though the court suggested that Swiss law as the applicable law
possibly governed the question.
It has been suggested that if a party lacks capacity by the applicable law but has it under
his personal law, the contract should be valid. The lex situs, it appears, governs not only
capacity to convey or to create an interest in land, but also capacity to contract to do so.

4. TORTS
In Phillips v. Eyre (1870) LR 6 QB 1 an action for assault was brought in England against
the Governor of Jamaica, the alleged tort having been committed in Jamaica. This was a
tort by English law and would have been so by Jamaican law, but after the deed was done,
the Jamaican legislature passed an Act of Indemnity, relieving the governor of liability. It
was held that the claimant could not recover here. In a celebrated judgment Willes J said,
in words which have sometimes since been treated as if they were contained in a statute,
that conduct abroad is actionable as a tort in England if:
(1) it is of such a character as to make it actionable as a tort had it been committed here
[i.e. English law applies], and
(2) it is not justifiable by the law of the place where it was committed.
In Phillips v. Eyre itself, (1) was satisfied, but (2) was not, so the claimant’s action failed.
Interpreted in Chaplin v. Boys [1971] AC 356 HL, as the latter was explained by the Court
of Appeal. In Phillips v. Eyre an action for assault was brought in England against the
Governor of Jamaica, the alleged tort having been committed in Jamaica. This was a tort
by English law and would have been so by Jamaican law, but after the deed was done, the
Jamaican legislature passed an Act of Indemnity, relieving the governor of liability. It was
held that the claimant could not recover here. In a celebrated judgment Willes J said, in
words which have sometimes since been treated as if they were contained in a statute, that
conduct abroad is actionable as a tort in England if:
(1) it is of such a character as to make it actionable as a tort had it been committed here
[i.e. English law applies], and (2) it is not justifiable by the law of the place where it was
committed.
In Phillips v. Eyre itself, (1) was satisfied, but (2) was not, so the claimant’s action failed.
In Phillips v. Eyre itself, the word ‘justifiable’ meant precisely that, for the governor’s
conduct was ‘justified’ by the subsequent legislation. In other contexts, it could mean one
of several things: (i) the conduct must be a tort by the local law, or (ii) the claim must be
in some way civilly actionable thereby, or (iii) though the claim is not civilly actionable,
the conduct is ‘wrong’ by that law. This would include conduct which attracts criminal
liability only.
The general is that if the claimant cannot prove liability in tort under English law as the lex
fori, he will fail. If he can do so then he will win unless the defendant shows he has a
defence by the lex loci. Should the defendant do this, then the claimant must show he can,
nevertheless, recover under that law. If he does so he wins, if he does not do so, he loses.
The rule in Phillips v. Eyre has been abolished in respect of all torts committed after 1 May
1996 but is preserved as respects defamation, and it continues to apply to all torts
committed before 1 May 1996.
Defamation
In defamation cases, where a defamatory statement is written or spoken in one country but
published in another country then, since publication is the gist of the action, the country
where publication took place was where the tort was committed. In Church of Scientology
of California v. Commissioner of Metropolitan Police, (1976)120 Sol. Jo. 690. The
alleged libel was contained in a report composed in England and sent to West Berlin
(Germany). The Court of Appeal held that the tort was committed in Germany, that is,
where the substance of the tort occurred.
Personal injury
Where the cause of action is in respect of personal injury or death resulting from personal
injury, the applicable law is that of the country where the individual was when he sustained
the injury.
Illustration: If A in Germany shoots an arrow across the border with France and hits and
injures B in France with it, French law applies. If B is brought to England and dies here,
French law is still the applicable law.
Property damage
Where the cause of action is in respect of damage to property, the law of the country where
the property was when it was damaged applies.
Illustration: In the above example B’s car was damaged, French law applies. It applies also
if, in consequence of the crash, no damage was observed at the time but the car falls apart
after it is brought to England.

Maritime torts (Torts committed on the high seas)

When an alleged tort has not been committed entirely on one ship, as where the act of
omission results in a collision, the English court will determine liability in accordance with
‘the general maritime law as administered in England’. This is ‘in truth nothing more than
English law’. Internationally agreed rules governing collisions at sea have been given
statutory effect in English law.
In Chartered Mercantile Bank of India v. Netherlands India Steam Navigation Co.
[1883] 10 QBD 521 P shipped cargo in D’s vessel, whose nationality was Dutch. Owing
to the negligence of D’s servants it collided on the high seas with another Dutch ship. P’s
rights against D were governed by English, not Dutch, law.
Here the rule in Phillips v. Eyre will apply. For this purpose the lex loci will be that of the
country of the ship’s flag, and, if the country of that flag has more than one law, the law of
the place of registry.
Torts committed on aircraft
Authority on the question of the law governing liability is lacking. It may be that if the
aircraft is over the high seas English law will apply, but if it is over a foreign country
section 11 of the 1995 Act will generally apply, the subjacent country being the locus
delicti.