Choice or non-choice of applicable law
[:en]One of the first steps in drafting an international contract is choice of applicable law. Only after such an assessment can a contract be correctly drafted, as only in this way can the parties draft a contract on the basis of the normative dictates of the chosen legal system.
This element is often 'snubbed' or put in second place.
plan by the uninitiated, believing this to be a mere formality.
Usually, parties wishing to start a collaboration in the international sphere insert into a contract what they usually insert into national contracts, sometimes using contracts they have already used to regulate national relations.
In reality, a lack of choice can lead to unpleasant surprises on the part of one or more contractors.
Case 1
For ease of understanding, it is considered necessary to give two classic examples of problems related precisely to a failure to choose the applicable law.
An Italian principal enters into an agency contract with a French promoter. The parties do not choose the applicable law, as they consider it to be entirely superfluous. After an employment relationship of four years, the Italian principal stops production. The French agent therefore requests an indemnity equal to two years' commissions, based on the rules of French law. In this case, in the absence of choice, the agent's law, i.e. French law, applies. The principal, following a discussion with his lawyer, realises that under Italian law the severance payment is much lower (ex Article 1751 of the Civil Code "the amount of the allowance may not exceed a figure equivalent to an annual allowance...) .
Case 2
An Italian company enters into a contract for the supply of goods with an American company. Nothing is specified in the contract as to the applicable law. In addition, a penalty clause is stipulated that obliges the American seller to pay a penalty of € 10,000.00 in case of delay in delivery of the goods. The goods are shipped more than a month late and yet the American company does not want to fulfil the penalty payment. The company turns to a lawyer to ask for clarification of the coercive methods of payment. To the client's surprise, the lawyer explains to him that the situation varies greatly depending on the applicable law. In fact, the penalty clause is valid unless the court reduces the amount if it is manifestly excessive (Article 1384 of the Civil Code.). In contrast, American law does not provide for the possibility of stipulating penalties (penalty), but only forms of lump-sum fixing of damages (liquidated damages).
One of the first steps in drafting an international contract is choice of applicable law. Only after such an assessment can a contract be correctly drafted, as only in this way can the parties draft a contract on the basis of the normative dictates of the chosen legal system.
This element is often 'snubbed' or put in second place.
plan by the uninitiated, believing this to be a mere formality.
Usually, parties wishing to start a collaboration in the international sphere insert into a contract what they usually insert into national contracts, sometimes using contracts they have already used to regulate national relations.
In reality, a lack of choice can lead to unpleasant surprises on the part of one or more contractors.
Case 1
For ease of understanding, it is considered necessary to give two classic examples of problems related precisely to a failure to choose the applicable law.
An Italian principal enters into an agency contract with a French promoter. The parties do not choose the applicable law, as they consider it to be entirely superfluous. Following a four-year employment relationship, the Italian principal stops production. The French agent therefore requests an indemnity equal to two years of commissions, based on the rules of French law. In this case, in the absence of choice, the agent's law, i.e. French law, applies. The proposer, following a discussion with his lawyer, realises that under Italian law the severance payment is much lower (ex Article 1751 of the Civil Code "the amount of the allowance may not exceed a figure equivalent to an annual allowance...) .
Case 2
An Italian company enters into a contract for the supply of goods with an American company. Nothing is specified in the contract as to the applicable law. In addition, a penalty clause is stipulated that obliges the American seller to pay a penalty of € 10,000.00 in case of delay in delivery of the goods. The goods are shipped more than a month late and yet the American company does not want to fulfil the penalty payment. The company turns to a lawyer to ask for clarification of the coercive methods of payment. To the client's surprise, the lawyer explains to him that the situation varies greatly depending on the applicable law. In fact, the penalty clause is valid unless the court reduces the amount if it is manifestly excessive (Article 1384 of the Civil Code.). In contrast, American law does not provide for the possibility of stipulating penalties (penalty), but only forms of lump-sum fixing of damages (liquidated damages).
[:en]One of the first steps in drafting an international contract is choice of applicable law. Only after such an assessment can a contract be correctly drafted, as only in this way can the parties draft a contract on the basis of the normative dictates of the chosen legal system.
This element is often 'snubbed' or put in second place.
plan by the uninitiated, believing this to be a mere formality.
Usually, parties wishing to start a collaboration in the international sphere insert into a contract what they usually insert into national contracts, sometimes using contracts they have already used to regulate national relations.
In reality, a lack of choice can lead to unpleasant surprises on the part of one or more contractors.
Case 1
For ease of understanding, it is considered necessary to give two classic examples of problems related precisely to a failure to choose the applicable law.
An Italian principal enters into an agency contract with a French promoter. The parties do not choose the applicable law, as they consider it to be entirely superfluous. Following a four-year employment relationship, the Italian principal stops production. The French agent therefore requests an indemnity equal to two years of commissions, based on the rules of French law. In this case, in the absence of choice, the agent's law, i.e. French law, applies. The proposer, following a discussion with his lawyer, realises that under Italian law the severance payment is much lower (ex Article 1751 of the Civil Code "the amount of the allowance may not exceed a figure equivalent to an annual allowance...) .
Case 2
An Italian company enters into a contract for the supply of goods with an American company. Nothing is specified in the contract as to the applicable law. In addition, a penalty clause is stipulated that obliges the American seller to pay a penalty of € 10,000.00 in case of delay in delivery of the goods. The goods are shipped more than a month late and yet the American company does not want to fulfil the penalty payment. The company turns to a lawyer to ask for clarification of the coercive methods of payment. To the client's surprise, the lawyer explains to him that the situation varies greatly depending on the applicable law. In fact, the penalty clause is valid unless the court reduces the amount if it is manifestly excessive (Article 1384 of the Civil Code.). In contrast, American law does not provide for the possibility of stipulating penalties (penalty), but only forms of lump-sum fixing of damages (liquidated damages).
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