The Gazette 1991

i SEPTEMBER 1991

GAZETTE

Contractual Obl igations (Appl icable Law) Act, 1991 by John King, Solicitor

provides that one may not exclude implied terms as to title in a hire purchase agreement. The Convention provides that such mandatory rules of law, in the case of consumers or employees in one country, may not normally be excluded as a result of the applica- tion of the law of another country. Formal Validity A group of articles deals with matters associated with the formal validity of contracts. It is provided that a contract concluded between parties who are in the same country is formally valid if it satisfies the requirements of the "The policy is . . . against the striking down of contracts for formal invalidity." law which governs it under the Convention, or the law of the country in which it is concluded. Similarly a contract concluded between parties in different countries is formally valid if it satisfies the formal requirements of the law of one of those countries. The policy here is clearly against the striking down of contracts for formal invalidity.

The Contractual Obligations (Applicable Law) Act 1991 was signed by the President on 8th May, 1991. It is expected that it will be brought into effect by way of commencement order towards the latter part of this year. Its purpose is to enable Ireland to ratify the 1980 Rome Convention on the law applicable to contractual obligations. Harmonisation

Close Connection The Convention also deals with what happens if the parties do not expressly or by inference choose what law is to apply to the con- tract. In such circumstances the contract will be governed by the law of the country to which it is most closely connected. As with many of the concepts in the Convention, the concept of "close connection" will not be new to Irish lawyers. However, the Convention attempts to clarify the concept by setting up certain presumptions. For instance, where land is the subject matter of a . . if the parties do not. . . choose what law is to apply . . . the contract will be governed by the law of the country to which it is most closely connected." contract, the presumption is that the contract is most closely connected with the country in which the land is situated. Mandatory Rules Having set out the general principles the Convention goes on to deal with specific issues. Of particular interest to practitioners will be the pro- visions in aid of consumers and employees. These provisions are de- signed to prevent consumers and employees from having their statu- tory rights eroded through the application of rules concerning the proper law of contracts. The domestic laws of many member states include what in the Convention are described as man- datory rules. These are rules, originating in statute, which parties to agreements may not exclude. Such a rule in Ireland is the pro- vision in the Sale of Goods and Supply of Services Act, 1980 which

The aim of the Convention is to harmonise rules relating to conflicts of laws within the EC. It will come into force in Ireland when the Act becomes law. Scope The Convention applies to con- tractual obligations in situations involving a choice between the laws of different countries, except in the case of certain matters which are specifically excluded from its scope. These are: — (i) questions involving the status of legal capacity of natural persons; (ii) contractual obligations re- lating to wills and succession; (iii) rights in property arising out of marriage; (iv) rights and duties arising out of a family relationship; (v) certain obligations arising under negotiable instruments; (vi) arbitration and choice of jurisdiction agreements; (vii) questions arising under company law and the law of agency; (viii) questions arising from trusts; (ix) matters relating to rules of evidence and procedure; (x) contracts of insurance cover- ing risks situated in the EC. Choice of Law Where contracts within the scope of the Convention are concerned an important principle is that a contract will be governed by the law chosen by the parties. That choice may be made expressly, or may be inferred from the surround- ing circumstances. Commercial lawyers will undoubtedly choose to express the parties' choice of law in a clearly drafted contractual provision.

John King

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