Matching terms and definitions
THE TENSION BETWEEN COMMON LAW DRAFTING TECHNIQUE AND CIVIL LAW GOVERNING LAW
International contractual practice adopts the models developed under Common Law, where little or no integration of the contract is expected, and therefore includes in the contract clauses expressing the assumptions of the parties, the purpose of the contract, the duties of the parties, the remedies in case of unexpected events, limitation of liability in case of unforeseen events, etc. This results in extensive and detailed contracts regulating all aspects of the deal and aimed at being self-sufficient, rather than relying on the rules and principles that are implied by law and would integrate the contract by applying the governing law if the governing law belongs to a Civil Law system. This can lead to a double tension.
First of all, a tension may arise between the detailed regulation of the contract and the rules of the governing law regulating the same matters. The details of the contract will to a large extent overlap with the regulation of the governing law. How should this be interpreted: As if the contractual regulation was redundant, and simply a repetition of the governing law principles? As an integration or correction of the governing law? Or as if the parties had waived the regulation of the governing law and opted instead for a contractual regulation of the same matter? Would the inclusion of extensive lists of representation and warranties mean that the parties have decided to take the question of the seller’s duty to inform into their own hands? What if the list of representation and warranties does not contemplate a representation that would have been covered by the duty of information contained in the governing law? Shall that particular duty become non applicable because the parties left it out of their representations and warranties?
The second tension is between the contract and any principles of the governing law that the parties may have relied on, but have not been referred to in the contract. This will particularly be relevant for rules that assume good faith and fair dealing. The whole contract may be drafted on the basis of a structure that denies the relevance of good faith and fair dealing, privileging the literal interpretation of the mechanisms that are expressly regulated in the contract. Yet one party may have accepted this contractual structure because it knew that the Civilian governing law would intervene in case of hardship, or conduct against good faith, etc. On the contrary, the parties may on purpose have chosen the Common Law drafting technique, in order to rely on the Common Law doctrine of interpretation and create an exhaustive regulation of their relationship. The question then arises: to what extent can the governing law be invoked, if it contradicts the assumption of a contractual practice that is based on different expectations? The governing law will certainly prevail in case of mandatory rules; but if the relevant rules are not mandatory, how will the judge interpret the parties’ choice of a contractual structure that is based on the exclusion of these principles? Will the judge apply the governing law’s criteria of good faith and fair dealing if the contract is based on a strict allocation of risks between the parties? The answer to these questions will vary from legal system to legal system, and will depend significantly on the degree of information and commercial sense of the judge. This creates an uncertainty that is detrimental to business relationships.
a. count onb. foresee
c. implement
d. mediate
e. statutory, compulsory
f. win the upper hand
g. harmful
h. distribution
i. things taken for granted
j. coordination with relevant legislation
k. independent
l. relief
m. superfluous
n. legal framework
o. choose
p. give up
First Page
(Restore this version)
Modified: 18 January 2016, 10:35 AM User: Ивелина Ганчева-Йоцова → ИГ
Integration = coordination with relevant legislation
Assumptions = things taken for granted
Remedies = relief
Self-sufficient = independent
Governing law = legal framework
Redundant = superfluous
Opt (for) = choose
Contemplate = foresee
Rely on = count on
Intervene = mediate
Invoke = implement
Prevail = win the upper hand
Mandatory = statutory, compulsory
Allocation = distribution
Detrimental = harmful