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GAZETTE
i SEPTEMBER 1991
Contractual Obl igations
(Appl icable Law) Act, 1991
by John King, Solicitor
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
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.
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
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.
John King
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