48 Private International Law-68-80
48 Private International Law-68-80
48 Private International Law-68-80
The Indian courts have follow the principle of English law in exercise of jurisdiction
over infants once the court assumes jurisdiction, the merits of the case will be decided in
accordance with lex fori which guardian and wards act,1890 and personal law of consent .
Regarding the recognition of foreign custody of guardianship orders, it have a full
bench decision of the Kerala high court in Margarate vs. Dr. Chacko(A.1.R.1970 KERALA)
where: Dr. Chacko, an Indian Christian domiciled in ‘India, went to Germany to study
medicine, and there fell in love with margarate a German domiciled women they had two
children out of his union, a boy and girl but there married life ran into heavy weather and
finally the marriage broke down .both husband and wife approached the German court for
custody and the guardianship of the children. The German court decreed custody of the
children to the wife with access to the husband once a day every week. Dr.Chacko,in
violation to the custody order of the German court, took away the children with him and flew
to India and went to his native place in Kerala. Marggarate there upon, came to Cochin and
started habeas corpus proceedings before the Kerala high court to recover the custody of the
children.
The main question before the Kerala high court was whether German custody order
should be recognized under the custody of the children restored to the petitioner. Govindhan
Nair. J(as he then was) cited with approval the decision RE P and particularly the
observation of lord denning in that case about the unsuitability of child’s domicile as
jurisdiction ground and held that the ordinary residence of the child is sufficient to confer
jurisdiction to court. So, even assuming that Dr.ChackoIndian domicile thus: conferring the
Indian domicile of origin to the children, since the children were ordinary resident and
present in Germany, the German court at jurisdiction to pass custody orders in regard to
them.
On the question of recognizing the German custody’s order, GovindhanNair.J
observed: “it is no doubt true that in all cases the courts need not blindly follow the order of
custody passed by a foreign court...” But “all courts in all countries respect each other’s
orders passed with jurisdiction and passed after a fair contest subject to any material and
sufficient change in circumstances that would justify the alteration of the term of the order
passed by the foreign courts”. Finally the court examined in detail the question whether it
will be in the interests of the children to give them to the custody of the mother in
accordance with the order of the German court. The court, after considering all the aspects
came to the conclusion that the interests of the children will be better served in restoring the
custody to the mother. The effort of his decision is that a custody or guardianship order
passed by a foreign court of competent jurisdiction will be recognized and given effect
unless it clearly found that it is against the welfare of the child.
69
UNIT-IV
CONTRACT
The contact in conflict of laws involves many transactions in trade and commerce. The
contracts are more complex when there is an involvement of foreign element; it is difficult to
determine the rights and liabilities of the parties. For instance the contract may be signed in
one country, the subject matter of the contract in another country, the place of the
performance in another country and the domicile of the contracting parties may be in another
country, so in that case there is a involvement of four different laws of four different
countries involved in the contract, so there is a conflict of laws exist there to determine
which of the following law can be applied to determine the rights and liabilities of the parties
in the contract. The nature of problem in contractual obligation is ascertaining the proper law
due to diverse connecting factors.
ROME CONVENTION:-
The Rome convention or convention on contractual obligation, 1980 is the principle
convention governing the contractual obligations. The Scope of the convention is given in
Article 1(1) provides that 'the rules of this Convention shall apply to contractual obligations
in any situation involving a choice between the laws of different Countries.
The Main purpose of Rome convention is to adopt uniform rules of conflict of laws
within the European community in which it was proposed by the Benelux nations (Belgium,
Netherlands, Luxemburg) countries in 1967 and it was finally drafted in the year 1980 and
came into force on April 1990. It is even accepted in India due to its international recognition
so that it would increase legal certainty and make it easier to anticipate more easily.
CONNECTING FACTORS:-
Two connecting factors have been appropriate to govern the law of a contract, viz;
(i) Lex loci contractus (law of the place where the contract was made);
(ii) Lex loci solutionis (law of the place where performance of the contract was due.)
70
THE ENGLISH CONCEPT OF PRIVATE INTERNATIONAL LAW
The English Private International Law Has Evolved The Principle Of Proper Law Of
Contract To Decide Questions Regarding Contractual Obligations Involving Foreign
Element. They Defined It As The Law Which The English Court Is To Apply In
Determining Obligations Under A Contract.
Article 3 (1) of the convention says: “A contract shall be governed by the law chosen by the
parties. The choice must be express or demonstrated with reasonable certainty by the terms
of the contract or the circumstances of the case. By their choice the parties can select the law
applicable to the whole or a part only of a contract.”
71
Choice is of two types express and implied choice. Both are mentioned in Article 3. In
express choice the parties themselves choose the proper law like lex domicille, lex loci
contractus etc.. Whereas in implied choice it is determined from the terms of the contract,
nature, circumstances then the proper law is determined.
The term ‘proper law’ was clearly defined in Indian General Investment Trust vs. Raja of
Kholikote as “the proper law of contract means the law which the court is to apply in
determining the obligation under the contract”.
The matter of ascertaining proper law depends on the intentions of the parties to be
ascertained in each case on consideration of: a) the terms of the contract, b) the situation of
the parties and generally on c) all surrounding facts from which the Intention of the parties is
to be gathered.
EXPRESS CHOICE
In Vita Food Products Inc. vs. Unus Shipping Co. Ltd. (1939) In this case, even though the
contract is mostly connected with just one country, the court chose to go with the law in
which the parties have chosen expressly and mentioned despite it has no connection with the
contract. Lord Wright an English jurist said that: ‘where there is an express statement by
the parties to select the law of contract, it is difficult to see other criteria to determine proper
law provided that the intention expressed is bona fide and legal, and provided there is no
reason for avoiding the choice on grounds of public policy’ the intention of the parties as to
the choice of law prevails’.
IMPLIED CHOICE
When the intention regarding governing law is not expressly stated, intention to be inferred
from the terms and nature of the contract, circumstances and the inferred intention
determines the proper law of contract. The court should find out the implied intention to
govern the contract, in the absence of such implied intention the court has to find out the
intention. The major task of the court is that they have to find the intention under which the
reasonable man and a prudent man under the same circumstances would have did, the judges
should have placed himself in the place of the reasonable man and find out the intention of
the parties.
THE ASSUNZIONE:
The contract is a carriage of wheat from French to an Italian port on an Italian ship and the
charter party was French merchants. The wheat was shipped under an exchange agreement
between French and Italian government and this deal is not known to Italian ship owners and
the contract was concluded in France by Italian and French brokers. The contract is drawn up
72
in English language in a Standard English form and the freight and demurrage to be payable
in an Italian currency in Italy. On the question of proper law of contract, we can see that the
facts and the circumstances are equally balanced between French and Italian law. The court
of appeal held that Italian law is the proper law since the contract to be performed in Italy
and the freight and demurrage to be paid in Italian currency
In Amin Rasheed vs. Kuwait insurance company, a Liberian company resident in Dubai,
insured a ship with the Kuwait Insurance Company. When a claim made by Liberian
company under this policy was rejected by Kuwait Company. Plaintiff sought an order to
serve a writ on Defendant which could be granted, providing the contract ‘by its terms, or by
implication, [was] governed by English law.’ There was no express choice of English law,
nor was it clear as to what was the implied law: both Kuwaiti law and English law had
claims to being the proper law of the contract. However, based on the surrounding
circumstances as well as the terms of the contract the rights and obligations should be
determined in accordance with the English law of marine insurance’. A significant factor was
that at the time of making the contract, Kuwait had no law of marine insurance.
LIMITATIONS:-
The limitation over determining the proper law is explained with Mandatory rules and most
closely connected test.
MANDATORY RULES:-
Article 3(3) of the convention speaks about mandatory rules. The purpose of this provision is
to prevent evasion of mandatory rules of law. This can be of any rules based on public policy
or invalidate provision.
The factors which help the court determine the proper law of the contract are those with
which the transaction had its ‘closest and most real connection’.
The following factors are considered by the Court when deciding this issue:
73
4. The parties place of residence and business.
Whether a contract has been concluded is, apparently, determined by the putative proper law:
The Parouth (1982). Thus, whether an offer has been accepted is determined by the putative
proper law.
The putative proper law will also determine whether consideration is a necessary element of
a contract. If the putative proper law is English law then the absence of consideration will
render a purported contract void ab initio. However, if the putative proper law does not
require consideration as a necessary element of a valid contract, then a valid contract may
result: Re Bonacina (1912).
The Biggest disadvantage is that when the law is not expressly stated, intention has to be
presumed or imposed upon the parties which introduce an element of uncertainty in the
proper law.
74
FORMATION OF CONTRACT:-
The formation of contract contains the essentials such as the offer, acceptance, consideration,
legal object, capacity but should not contain any vitiating factors such as fraud, mistake,
misrepresentation etc. the agreement can be seen in two ways i.e. factum of the
agreement(offer and acceptance) and reality of the agreement(personal laws of the parties).
FORMAL VALIDITY:-
The concern in this is not with procedural formalities such as status of fraud but with non-
procedural formalities such as a contract for the conveyance or creation of a legal estate in
land having to be in a deed. It is likely that compliance with either the lex loci contractus or
the putative proper law will suffice to formally validate the contract.
ESSENTIAL VALIDITY
The proper law determines whether the contract or its terms, including exemption clauses,
are valid and effective. If a contract made in England is procured through pressure which
amounts to duress, it is voidable by the innocent party:
INTERPRETATION:-
Whereas interpretation of the terms of a contract is usually governed by its proper law, it is
permissible for the contracting parties themselves to nominate one legal system to govern the
contract and to specify that another system be used to interpret it, i.e. ‘the parties may well
contemplate that different parts of their contract shall be governed by different law’.
CAPACITY:-
The three possibilities are,:
75
Here, Spanish shippers contracted with R, English charterers, in London, to carry goods from
Calcutta to Barcelona. The shippers were to be paid £50/ton freight in Barcelona on delivery
there. [i.e. Barcelona was the place where the contract was to be performed]. However, after
the voyage had begun, but before the goods arrived in Barcelona, a Spanish law enacted that
freight must not exceed £10/ton freight. Accordingly, the charterers, R, agreed to pay £10 but
no more. The shippers brought an action in England for the balance. It was held English law,
which was the proper law of the contract, regarded the Spanish legislation as a frustrating
event. The action for recovery of the balance was unsuccessful.
RENVOI:-
As per Article 15 of the convention it excludes the application of renvoi over contractual
obligation.
SPECIAL PROVISIONS:-
Articles 5 and 6 of the Rome Convention contain special provisions in relation to consumer
contracts and individual contracts of employment. These have the effect of either limiting the
ambit of the general choice of law provisions or excluding the presumptions.
Article 5 - Consumer Contracts provides that a consumer contract is one 'the object of which
is the supply of goods or services to a person (‘the consumer’) for a purpose which can be
regarded as being outside his trade or profession, or a contract for the provision of credit for
that object.
CASE WHERE THE PROPER LAW IS NOT THE ONLY LAW APPLICABLE
The increasing tendency today in English law is to follow the view that all aspects of
contract should be governed by proper law in the objective sense i.e., the law of the country
with which the contract is most substantially connected. The subjective theory of proper law
(proper law is the law chosen by the parties, irrespective of existence of connection with the
contract) is not gaining ground. The view expressed by Cheshire that “the courts should, and
do have a residual power to strike down, for good reason, choice of law clauses totally
unconnected with contract,” has a good deal of supporters. Be that as it may, it should be
borne in mind that there are a few areas in the law of contracts where some other law than
the proper law becomes relevant. The more important these are stated below among:
76
ry, and if a contract fails to satisfy the
According to this view, local formalities are compulso
e the contract is made the contract is
formalities prescribed by the law of the place wher
is that compliance with local formalities
unenforceable. But now the generally accepted view
affect the enforceability of contract.
is not compulsory and its absence by itself will not
tant because, as regards formal validity,
Nevertheless, lex loci contractus still remains impor
be sufficient.
the observance of formalities prescribed by it will
cient, though in other respects
In other words, compliance with the local from is suffi
where the contract is made. Thus the
the contract may be totally unconnected with the place
but the contract might have been made
proper law of a particular contract may be Indian law;
valid if it complies with the forms
in Germany. In such a case the contract is formally
the formalities required by the Indian
prescribed by the German law. Failure to comply with
contract is formally valid if it satisfies
contract act will not render the contract void. Thus the
lities of the proper law.
either the formalities of lex loci contractus or the forma
(b) ILLEGALITY :
lity of a contract by referring
It is not possible to decide the question of illega
into account other legal systems also.
exclusively to proper law; it may be necessary to take
foreign contract regarded as immoral,
For example, an English court will not enforce a
proper law. Same is the case when a
although it may be perfectly valid according to the
c policy. It may be said that in the
foreign contract offends against an English rule of publi
Thelex fori, Thelex loci contractus
matter of illegality of contract, in addition to proper law.
ormance) are relevant and should be
and The lex loci solutionis (the law of the place of perf
taken into consideration.
FIVE PRINCIPLES:
HERE, WE MUST EXAMINE THE FOLLOWING
77
out by Cheshire, it is only rarely that contracts
valid under proper law are denied
enforcement in England as being contrary to the public
policy of the lex fori.
When a foreign contract is merely void but not illegal
by the English lex fori, can it be
enforced in an English court? For instance, wagering
contracts are void in English law, but
not illegal. The position is that if the contract is valid
by its proper law, it is enforceable in
England notwithstanding its infringement of the English
law, as lex fori. Thus money won at
play or lent for play is recoverable in England, if the same
is recoverable by the law of the
place where it was won or lost.
78
involve an unjustifiable
solution is, says Cheshire, is contrary to doctrine since it may
legal system. Cheshire
disregard of the proper law if the contract is governed by a foreign
propositions do not
maintains that the decisions generally cited in favour of the above
the lex loci solutionis
actually support it. According to Cheshire: when the proper law and
ed by the proper law.
are not identical, performance of the contract is a matter to be govern
opportunity to consider
For a decisive answer, we have to wait till the English court gets an
its proper law being the
the effect of illegality of contract at a foreign place of performance
law of still another foreign country.
79
parties should have capacity by the law with which the contract
has the most substantial
connection. Cheshire supports this view. The valid formation of a contra
ct in other respects
is governed by the proper law. It is desirable that capacity to contract
also be governed by the
same proper law.
NEGOTIABLE INSTRUMENTS
Negotiable instrument is a document that contains several distinct contrac
ts and each party
who puts his signature to the document incurs a separate liability. In
view of this, the
important question in relation to negotiable instrument is that should this
series of contracts
be regarded as single transaction and therefore governed by single law
or should they be
regarded as distinct transaction capable of being subject to several laws.
In bill of exchange
the original contract between the drawer and the acceptor creates the
primary liability.
Hence it can be said that when a conflict of laws the portion of each contra
cting party should
be decided by reference to single law,i.e. the law that govems acceptance.
But this view is
not taken by English law. The English law and the Indian law adopts the
general principle
that liability of each separate contracting party is governed by the law
of place where is
separate contract is made. The party has no right to select their own proper law.
It has to be noted that both in English law and Indian law regarding Negotia
ble
Instruments have been codified; in England, the Bill of Exchange Act,
1882 and India, the
Negotiable Instrument Act 1881. This codification covers conflict of laws rules in relation to
Negotiable Instruments. But the statutory provision in England as well as in India is not
exhaustive. Therefore in regard to matters not covered by statutory provisions the general
principles of Private International Law should be applied.
VALIDITY OF A BILL OF EXCHANGE
The validity of a bill and its supervising contracts depends upon compliance
with the law
governing formal validity, capacity and_ essential validity including
interpretation.
FORMAL VALIDITY
Formal validity is subject to certain exceptions governed by principle locus
regit actum
(place governs the apt meaning in the case of contracts formalities of the
place where the
contact is made governs the contract)
Section 72 (1) of the Bill of Exchange Act contains the English rules on this
matter. The
Indian Act, it may be noted is silent on necessary formalities. According
to the English
statue, the formal validity of bill drawn in one country and accepted, negotiated
and payable
in another, shall be determined by the place of issue. Formal validity
of each of the
80
cf
supervising contracts such as acceptance and endorsement shall be determined by the law
the place where such contact is made.
Two exceptions
(1) A bill issued out of the United Kingdom is not invalid by reason that 1t 1s not stamped
in accordance wiih the place of issue. This is based upon the pruiiple of non-
recognition of foreign revenue laws
(2) A bill issued out of the United Kingdom which is formally valid according to the law
of the United Kingdom, though not according to the law of the place of issue, is, for
the purpose of enforcing payment therefore valid as between all persons who
negotiate hold or become parties to it in the United Kingdom
CAPACITY
Neither the Negotiable Instruments Law, nor the Bills of Exchange Act, nor the Hague
Convention has attempted to lay down a uniform municipal rule governing capacity. On the
continent there were formerly many special restrictions affecting the capacity of parties to
obligate themselves by means of bills and notes, and in a few countries some of these
restrictions still subsist. The principal conflicts that may arise will relate to the capacity of
married women and infants. What should be the rule in the Conflict of Laws governing their
capacity to bind themselves by bill or note?
The Bills of Exchange Act does not answer the above question. The general rule
governing commercial contracts therefore applies. What the English law on the subject is
cannot be stated with certainty. There appears to be only a single case throwing direct light
upon the subject, that of Male vs. Roberts. In that case an action was brought in England to
recover a sum of money advanced in Scotland to an infant who appears to have been
domiciled in England. Lord Eldon, at Nisi Prius, held that the defence of infancy depended
upon the lex loci contractus, the law of Scotland. At the time the decision was rendered, the
English law seemingly favoured the view, both with respect to ordinary commercial
contracts and contracts of marriage, that the law of the place where a contract was entered
into determined the capacity of the parties. A noticeable change in the English cases appears
during the latter half of the nineteenth century, indicating a decided tendency to adopt 'the
continental view, which regards the question of capacity as belonging to the personal law
and as subject, therefore, to the lex domicilii or the lex patriae. ;
In the case of Sottomayor vs. De Barros the Court of Appeal per Cotton, J. says: “As
in other contracts, so in that of marriage, personal capacity must depend on the law of the
domicile.” And this rule is said to be “a well recognized principle.” In Cooper vs. Cooper the
81