AN INTRODUCTION TO CONTRACT LAW
IN ENGLAND AND THE UNITED STATES
RUC LAW SCHOOL
CLASS 1
Stephen Leonard (李文)
A Introduction and Resources
1. There are three aims of this course:
(a) First, to introduce the key elements of contract law in England and the United States. Although we will not consider the contract law in Hong Kong in these classes, it is (on the whole) very similar to the law in England. Where possible, we will consider the sort of issues that commercial contract lawyers face in practice. I will not deal with issues which effect the validity of a contract (for example, mistake, illegality, duress, misrepresentation and fraud. If anyone is interested, these subjects are all dealt with in the textbooks I recommend.)
b) Second, to improve your ability to read and analyse common law cases. The last part of most classes will involve considering at least one case from England or the United States (or maybe both). You will be encouraged to participate in discussions. I will send you the cases to read around 5/6 days before each class.
(c) Finally, to improve your legal writing skills. The exam will comprise three parts:
· Two case briefs (20% each). I will assign one English and one United States case from those we read. At appendix 3 is a note explaining how to brief a case. I will also provide other materials on precedent and the use of cases in the common law system. I will let you know the deadline for submitting these. You may also practice by submitting one further case brief before the deadline. I will return this with my comments.
· A legal memorandum (60%). You will have at least 2 weeks to submit a memorandum on a subject I will give you. This will be a practical issue of the sort you will have to consider if you want to be a lawyer. I will also provide materials on how to write a legal memorandum.
All these exam exercises MUST be your own work and not copied (in whole or in part) from other students or sources. If not, you will automatically fail this course.
2. I will provide a note and materials in advance of each class. The main texts I will refer to are:
· Contract Law by Ewan McKendrick (10th edition 2013). A concise and useful summary of English contract law that is written by an Oxford professor who is one of the leading experts on contract law.
· Contracts in a nutshell by Rohwer and Skrocki. A brief introduction to contract law in the United States. This is not very detailed but does gives a lot of practical examples. It is (in my view) useful to get an overview of US contract law. I also have a longer textbook called Calamari and Perillo on contracts for anyone who wants more details. I will give references to both these textbooks in my notes.
I will bring copies of all these books to class. These are the books I recommend.
For anyone who wants more detail for English contract law (and by extension contract law in Hong Kong), I recommend “Text, cases and materials on contract law” (5th edition 2012) also by Ewan McKendrick. This is a detailed study of English law with lots of questions and materials (including extracts from cases). I like this book and it would be an ideal book for any of you who wish to study contract law in more detail at a university in England or Hong Kong. It is much too detailed, however, for this course. For anyone interested in Hong Kong contract law, I have a copy of Contract Law in Hong Kong (2nd edition) by Fisher and Greenwood. However, much of the caselaw referred to is English. The main difference is in the statutes as English statutes are not automatically followed in Hong Kong (even before 1997).
For (general) legal terminology, I recommend:
· “1001 legal words you need to know” (Feinman). This has translation into Chinese of the legal words referred to as well as explanations in English.
· The Oxford Dictionary of Law.
Proposed Syllabus[1]
3. I propose the following (for each topic we will consider the approach in England and the United States):
Sources of law/how commercial contracts are negotiated in practice (today).
Choice of law and dispute resolution clauses. Practical issues for contracts written in English/Chinese.
Contract formation (i) - Offer and acceptance. Option contracts.
Contract formation (ii) – Consideration and ways round it (Deeds and Promissory Estoppel.)
Contract formation (iii) - The “battle of the forms”.
Good faith.
How do courts/arbitrators construe contracts? The parole evidence rule. The use of market practice.
Privity and third party rights/liabilities.
Conditions/conditions precedent/conditional contracts.
Force Majeure.
Dealing with adverse future changes.
Breach of contract.
Remedies for breach – (i) Equitable (injunctions, specific performance, account, rectification).
Remedies for breach – (ii) Legal (damages/liquidated damages).
Exclusion and limitation of liability clauses.
B. Sources of Contract Law
International Conventions
(See McKendrick pages 6-11 and the EU in 3 below).
1. The most important international convention is the United Nations Convention on Contracts for the International Sale of Goods[2] (CISG). This has been adopted as law by a large number of states including China (but not Hong Kong), the United States, Japan, Germany, Canada, Australia and France. It has not been adopted by the UK, Brazil or India. It only applies to international sales of goods (and so not sales of goods within a country). It is also possible for parties to a contract to agree that the CISG does not apply[3]. So it is possible for a sales of goods contract between parties in China and the US to say:
“This contract is governed by the laws of the People’s Republic of China. However, the parties specifically waive the application of the UN Convention on Contracts for the International Sale of Goods.”
2. The International Institute for the Unification of Private Law (Unidroit)[4] is an independent intergovernmental organisation with its seat in Rome. Its purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups of States. It has produced a well-known set of rules for use in international contracts. They are the Unidroit Principles of International Commercial Contracts 2010 that were adopted in May 2011[5]. These rules have no general legal effect and only apply to a contract if the parties expressly agree. A group of European scholars has also produced a document called the “Principles of European Contract law.[6] (“PECL”)”. We will not consider either of these as, although academics like studying them, they are not widely used in practice.[7] For example, see the Oxford University law school survey of businesses across Europe[8]. It was a small sample of 100 businesses and so may not be truly representative.
Q26 asked when conducting cross border transactions how often did they use the PECL in their contracts. The answer was: 90% never, 6% almost never and 4% occasionally.
Q25 (UNIDROIT principles) only 4% replied “often”, 63% replied “never” with 20% “almost never”.
As the Unidroit Principles and the PECL have no formal legal effect they are sometimes referred to as “soft law”
England
3. There are three main sources of contract law (in order of hierarchical importance):
European Union Law
Since 1973 the United Kingdom has been a member of the European Union. Over the years, EU law has become increasingly important in many aspects of UK life. Therefore, anyone who studies English law will usually also have to consider the impact of EU law, which overrides national law. This can cause difficulties as EU law tends to be drafted from the civil law perspective (except for the UK, Ireland, Malta and Cyprus all the other member states are civil law jurisdictions). There are increasing areas of law where the common law rules have been replaced by EU law. EU laws apply across the whole of the EU. There are two main categories of EU laws. Regulations （规则[9]）that are immediately binding in member states without further legislation. Directives （指导[10]）that are not directly binding but which give a time limit for member states to implement by passing their own legislation. A member state, therefore, has discretion as to the precise form in which the Directive is implemented.
Over the years there have been attempts to (indirectly) harmonise contract law within the European Union. A summary of the key steps in this gradual attempt to harmonise contract law within the EU are:
· The Product Liability Directive of 1985 《1985年产品责任指导》(as amended in 1999)[11]. In essence this provides for strict liability (or liability without fault) for the manufacturers of products.
· The Unfair Terms in Consumer Contracts Directive of 1993（《1993年消费合同中的不公平条款指导》）.[12] This seeks to protect consumers (not acting in the course of a business) when entering into contracts on the basis of a seller’s standard terms that have not been negotiated by the parties.
· Rome I（《罗马I号》）[13] of 2008. This is a regulation that sets out the rules that govern the law that applies to contracts for civil and commercial matters. (A separate Regulation called Rome II （《罗马II号》deals with identifying the law that applies to non-contractual obligations – for example, torts[14]).
· In October 2011, the European Commission went a stage further and produced a proposal for a Regulation on a common European sales law（《欧洲统一货物买卖法》）[15]. This proposes an “optional” single sales law for EU countries. This would not replace each country’s sales contract law but be an alternative that parties to contracts could agree to apply. So it would be an optional 29th contract law (in addition to the 28 contract laws that the members of the EU currently have) for transnational sales in the EU.
The Commission says :
Differences in contract law between Member States hinder traders and consumers who want to engage in cross-border trade within the internal market.
The overall objective（目的） of the proposal is to improve the establishment and the functioning of the internal market by facilitating the expansion of cross-border trade for business and cross- border purchases for consumers. This objective can be achieved by making available a self- standing uniform set of contract law rules including provisions to protect consumers, the Common European Sales Law, which is to be considered as a second contract law regime within the national law of each Member State.
The proposed Regulation applies
· To contracts for the sales of goods;
· Only if the parties to the contract agree;
· To cross border sales contracts where at least one party is within the EU.
There is no date yet for implementation and there has been much opposition so far from the civil law as well as common law countries. The proposal is likely to cause vigorous debate within the EU as
· There is great opposition from the common law countries in the EU (in particular the UK with the Republic of Ireland, Cyprus and Malta);
· Any change would involve costs – the need to train lawyers and change contracts. At present the EU’s financial health is not good and so there may be resistance to these changes on costs grounds and
· There is already an international convention for the sales of goods (the Vienna Convention/CISG). 23 of 27 of EU members are already parties to this as is the PRC.[16]
The original proposal has now been diluted just to cover internet sales. For a brief summary of the current position see Appendix 2.
4. There has so far been particular hostility from the UK to attempts to harmonise contract law. This is not just because of a number of differences between the common law and civil law approach to contracts. There are more powerful reasons for the UK’s hostility. London is an international centre (not just a European one) and many foreign businesses choose to have their contracts governed by English law. As a result many foreign parties then choose to resolve their contractual disputes either in the London courts or by international arbitration in London. The use of English law, therefore, gives an economic benefit to England. For example, foreign parties give business to London law firms and then use hotels and other facilities in London if they need to attend court or arbitration hearings. The UK Government is, therefore, unlikely to give up the use of English contract law.
5. This was made clear in the UK Government’s recent response to the Green Paper proposal by the European Union for a single European contract law[17]:
The English common law is the favoured choice of global (and inter-EU) commercial contract law. It should be borne in mind that if EU legislation somehow unsettled the current commercial position of the English common law then any business the UK lost would most likely not be displaced elsewhere in the European Union but rather would be more likely go to a non-EU common law jurisdictions such as New York, Switzerland[18] and Singapore.
6. The UK has a history of not participating in contract codes based on a civil law model. It is also one of the few EU countries that is not a party to the Vienna Convention on the International Sales of Goods. A few years ago there was discussion on whether the UK should join and a report was produced in July 2008 by the Financial Markets Law Committee – “Implementation of the Vienna Sales Convention.”[19] Underlying the report is the sense that England has the best law and legal system in the world!