Contract

1) How much influence does a choice of forum clause have in determining the
proper law of the contract?

Choice of forum clause or arbitration clause

-Parties agreed that courts of certain country shall have exclusive jurisdiction over the contract or -
arbitration shall take place in certain country which usually permits the inference that the law of that
country is the proper law of the contract. This can be seen in the case of

Tzortis v Monark Line Fact: There was a contract for a sale of ship. The seller of ship was from
Sweden and the buyer was from Greece. The ship was going to be collected from Sweden, payment
was going to be made in Sweden and the contract was made in Sweden. However, there was no
choice of law clause. But there was an arbitration clause that arbitration shall be held in England if
dispute arose.

Held: In the lack of express of law choice, the choice of forum clause is an irresistible inference that
the proper law of contract is the law of the forum. Therefore, the proper law is English.

[Compagnie d'Armement Maritime v Compagnie Tunisienne de Navigation]

Fact: The contract was about the transport of petroleum from one port in Tunisia to another port in
Tunisia. The parties intended to use French ships to transport the petroleum. Clause 13 of the
contract says that the proper law of the contract is the law of the flag of the ship. Clause 18 says that
in the event of a dispute, the matter will be settled in England. However, they used many ships and
each ship has a different flag. (Therefore, Clause 13 becomes meaningless.)

COA: Clause 13 became meaningless due to different flags were used for different ships. Applying
Tzortzis ‘s case, choice of forum clause is absolute, so clause 18 will be followed. Hence, the proper
law of the contract was English law.

HOL: The court did not apply Tzortzis decision and held that the choice of forum clause was
influential but not irresistible (contradict Tzortzis). The proper law is French law as it was intended
by the parties when they made the contract (they intended to use French ship when they made the
contract) .

Arbitaration clause must be treated as indicatiom to be considered together with the rest of the
contract relevance surrounding facts. Always it will be a strong indication but in some cases it must
give ways where other indications are cleared.

HOWEVER WHERE THE Choice of forum CLAUSE POINTS is on a certain country, BUT THE OTHER
RELEVANT CIRCUMSTANCES ARE SPLIT BETWEEN TWO OR MORE COUNTRIES, that certain clause will
be HELD DECISIVE IN MAJORITY OF CASES (EVEN if THERE is LITTLE OR NO CONNECTION WITH
THAT COUNTRY APART FROM THE FACT THAT that the choice of forum is to be held there.

*An arbitration clause/choice of forum is an important factor and may often be a decisive one but it
is not a conclusive factor in deciding the choice of law.
 2) DNW is an Italian car manufacturer which produce fancy sports cars. Jo’s Wheels
is an international chain of car dealers incorporated in England. Both these
companies enter into a contract in Bologna, Italy where DNW is to supply Jo’s
Wheels a range of their latest sports cars. The cars are to be delivered in
Denmark and payment is to be made in US Dollars. The contract is a standard
form contract used often by Jo’s Wheels. The cars were supposed to be
delivered by an Italian ship but a last minute issue caused a Bolivian ship to be
used instead. There is a clause in the contract which states that the contract is to
be governed by the law of the ship.

A dispute arises and you are the judge in the case. What do you think is the
proper law of the contract?

Issue: Whether Italy is the proper law of the contract ?

To determine the proper law of the contract there are 3 ways which include implied choice of law
and the real and substantial tesr

Implied choice of law

[Compagnie d'Armement Maritime v Compagnie Tunisienne de Navigation]

Fact: The contract was about the transport of petroleum from one port in Tunisia to another port in
Tunisia. The parties intended to use French ships to transport the petroleum. Clause 13 of the
contract says that the proper law of the contract is the law of the flag of the ship. Clause 18 says that
in the event of a dispute, the matter will be settled in England. However, they used many ships and
each ship has a different flag. (Therefore, Clause 13 becomes meaningless.)

COA: Clause 13 became meaningless due to different flags were used for different ships. Applying
Tzortzis ‘s case, choice of forum clause is absolute, so clause 18 will be followed. Hence, the proper
law of the contract was English law.

HOL: The court did not apply Tzortzis decision and held that the choice of forum clause was
influential but not irresistible (contradict Tzortzis). The proper law is French law as it was intended
by the parties when they made the contract (they intended to use French ship when they made the
contract) .

Applying the case to the current situation the proper law of the contract the parties included a
clause that the governing law is the law of the ship which was initially Italy law. The bolivian ship was
only used because of a last minute issue.

Further, I apply the test of the most real and substantial connection to the contract.

The Assunzione

Held:

Based on the facts, since the payment was to be made in Italian currency, the proper law was Italian
law. (but currency is not objective, it is just for this case based on the facts). The court rejected the
contention that the proper law should be French law since the contract was signed in France
because the contract was negotiated in several places and it just happened that it was signed in
France.
r there is a legal system with the most real and substantial connection to the

contract

[Sayers v International Drilling]

-Lord Salmon: All the English element was just there for convenience. Since Dutch employer used the
same standard for different employee and due to business efficacy, the contract shall be governed
by the same law which is the law of employer. The proper law would be Dutch law and the clause is
valid

Dissenting judgment from Lord Denning: The contract was made in England, in English language,
salary paid in pound, and the contract was administered in England. Therefore, it had the closest and
most real connection with England)

Italy has the most real and substantial connection to the contract. This is because DNW is from Italy,
the contract was made in Italy and they intended to use Italian ships. All of these factors shows that
Italy has the most real and substantial connection to the contract compared to England, Denmark
and US.

Therefore Italy is the proper law of the contract.

Look into original intention of the parties

3) What are the situations in which a contract is void because of illegality?

1st: The choice of law must not against the public policy of our country

o The English courts will not enforce a contract whose performance requires the doing of an act in a
foreign friendly country which is an offence by its law.

o The English courts will not enforce a contract the parties to which intend either to do themselves
or to procure a third party to do such an act which is unlawful in such a country. § De Wutz v
Hendricks: a contract to raise money to assist a rebellion in Crete,a contract for the supply and sale
of whisky which it was intended should be smuggled into the US and ultimately sold and consumed
there in violation of the laws was not enforced. § Regazzoni v KC Sethia, a seller in India agreed to
sell jute bags to a Swizz buyer for delivery to Genoa. The seller knew that the buyer intended to
resell and deliver them to South Africa, and they both knew that under Indian law it was a criminal
offence to export jute to South Africa from india, where the jute was to be obtained. The HOL
refused to enforce the contract

2nd: The choice of law must not mean to avoid a certain law

notes

3rd: Supervening illegality

o Ralli brothers v compania Naviera Sota v Aznar: Spanish shippers contracted with English
charterers in London to carry goods from Calcutta to Barcelona. They were to be paid 50P per ton
freight in Barcelona on delivery there. After the voyage had begun, but before the goods arrived at
Barcelona, a Spanish law enacted that freight must not exceed 10p per ton. The charterers agreed to
pay the 10p. o There was no attempt to evade Spanish mandatory rules, the parties at the time of
contracting, were wholly innocent of any nefarious intent and no such rules then existed. The COA
treated the Spanish law as a frustrating event, relying on cases of supervening illegality by British
legislation. Since English law was the applicable law, it followed that the contract was frustrated,
Spanish legislation having the effect of -preventing full performance

4) Come up with a case note on the case of Compagnie d’Armament SA v Compagnie Tunisienne de
Navigation SA [1971] AC 572, [1970] 3 ALL ER 71.

5) You are a lawyer in an international law firm and your client is a Malaysian company. They want to
enter into a contract with a Chilean company. Your company wants the contract to be governed by
Malaysian law. Advise them on how to go about doing this.

First, I will advise them to have a express choice of law because the contracting parties will expressly
stated the law that governs the contract -the clause must be clear/ unambiguous. Therefore my
client can put Malasyian law as the proper law in the contract.

Vita Food Product Inc v Unus Shipping Co Ltd

-Where the parties have expressly stated their choice of law of the contract, it will be given effect
provided that the intention for that choice was made bona fide and legal, and there should be no
reason for avoiding that choice on the ground of public policy

If they are not able to put in express choice of law, they may do it impliedy. implied choice of law
refer to the intention of the parties with regard to the law governing the contract which is not
expressly stated in words -intention can be inferred from the nature and general circumstances of
the case -such intention would determines the proper law of the contract

There are several way to do this. Firstly by Choice of forum clause or arbitration clause.

Tzortis v Monark

Held: In the lack of express of law choice, the choice of forum clause is an irresistible inference that
the proper law of contract is the law of the forum. Therefore, the proper law is English.

Secondly by having a standard form of contract

Sayers v International Drilling

-Lord Salmon: All the English element was just there for convenience. Since Dutch employer used the
same standard for different employee and due to business efficacy, the contract shall be governed
by the same law which is the law of employer. The proper law would be Dutch law and the clause is
valid

Legal System with most real and substantial connection to the contract

The Assunzione

Based on the facts, since the payment was to be made in Italian currency, the proper law was Italian
law. (but currency is not objective, it is just for this case based on the facts). The court rejected the
contention that the proper law should be French law since the contract was signed in France
because the contract was negotiated in several places and it just happened that it was signed in
France.

Applying to the current situation, my client should show that Malaysia have the most real and
suctantial connection to the contract such as making the payment in malasyian currency or sgn or
perform the contract in Malaysia.

Clearly state that Malaysian Law is applicable do be vague. Don’t say the word the law of this
country is to be governed. Use clear words

-Express choice of law

Clear & unambiguous – properly worded

-Inside clause- Use Malaysian law instead of Malaysian courts (cannot have choice of courts clause)
agnew case

-Clause expressly stated to exclude Chilean law

-Bona fide & legal (made sure not illegal, exp: went against public policy)

-state that : Any col rules that may be changed this proper, such rule should be disregarded and the
proper law should be Malaysia