Appunti International Business Law - a.a. 2021/2022

Technical Tool: Contracts and National Laws

Contracts are mainly regulated by Article 1321 of the Civil Code, which provides the following definition: "A contract is the agreement between two or more parties to establish, regulate, or extinguish a patrimonial legal relationship among themselves" (patrimonial meaning economic). It is important to note that a marriage, although an agreement, is not considered a contract as it is not related to the economic aspect of relations.

In general terms, a contract is a voluntary, deliberate, legally binding, and enforceable agreement that creates mutual obligations between the parties involved. These parties can be natural persons or legal entities. Legal entities are typically companies, which can be for-profit or non-profit. Public entities, on the other hand, usually do not have legal personality and operate under a different status as part of state organization.

When the state operates in society through companies that it owns, these companies may have a public nature but still operate in the market as independent entities.

Written contracts can be customized by the parties involved, but there are certain limits:

• Social Interest: Parties cannot go against public rules such as urban planning, fair distribution of public services and facilities, and environmental protection.
• Free Competition: Restrictions are in place to prevent monopoly practices and concentrations, with the aim of protecting competition.
• Protection of Weaker Parties: Employees and consumers are protected, and certain decisions cannot be freely made in their contracts. These contracts are not considered business contracts.

In some cases, even business contracts may have a power imbalance. For example, when a small company deals with a big company. However, in general, the factual difference in power is not relevant when operating in business.

International contracts are contracts that are entirely covered by one single jurisdiction, as opposed to domestic or national contracts.

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contain one or more “foreign elements” (i.e. elements of extraneity, elementi diestraneità) and therefore are connected with more than one state/legal system. For example, acontractbetween parties belonging to different legal systems or to be performed in a different country. In the majorityof the cases, the internationality of the contracts is related to the internationality of the parties. In limitednumber of cases, the element of extraneity is the place where the contract has to be performed.

Rules governing international contracts (i.e. sources of international contracts law):

• NATIONAL LAWS;
• INTERNATIONAL CONVENTIONS (e.g. The United Nations Convention on Contracts for theInternational Sale of Goods (Cisg) of Uncitral, known as Vienna Convention (1980): they need to pass theratification process;
• NON-STATE RULES (lex mercatoria) (e.g. ICC model contracts and standard clauses (Incoterms): theimpact is limited, they remain from the past, a set of

rules that are not been issued by states but have been spontaneously created by the community of workers, such as merchants. Technically these are not sources of law, they are more integrations to contracts;

• CUSTOMARY BUSINESS PRACTICES AND CASE LAW;

In any event, national laws are still at the foundation of the whole international business legal framework.

INTERNATIONAL PRIVATE LAW

The branch of national law of a country (of any country) that establishes rules for dealing with private law cases involving a foreign element.

Where there is a conflict of laws, two main questions arise:

• What court (judge or arbitrator) has jurisdiction to deal with the matter? (Conflict of Jurisdictions or International civil procedural law);
• What law shall be applied to the matter? (Conflict of Laws);

Non-performance of the contract: I can sue you, but almost all the time it is a continuous business relation (I understand you had a problem with the supply of products, so no problem).

country has its own system, but almost all systems are based on the same principles.

ITALIAN INTERNATIONAL PRIVATE LAW

Legge 218/95: one of the most sophisticated and advanced on the matter in the world. It covers both conflict of jurisdictions and conflict of laws. It has been written according to Rome Convention 1980, replaced by the EU ROME I Regulation 2008. Member states should follow the regulations of such agreement.

• JURISDICTION: generally, it is jurisdiction of the defendant or by choice of the parties (two parties: 1.(attore), 2. (convenuto):

CLAIMANT DEFENDANT

if I complain and I want to sue the other party for non-performance or any kind of violation of the agreement, I must go there and refer to the judge of the place where the defendant has its place of business. But the parties are free to choose, so actually they can intervene in this mechanism. Jurisdiction of the defendant is the automatic way, if the parties never wrote nothing on this matter.

• SUBSTANTIVE LAW:

places of business and of incorporation;

• the place(s) where performance is to occur;
• the place where the contract is concluded (which may not be obvious where negotiations were concluded by letter, fax or e-mail).

MANDATORY RULES AND PUBLIC POLICY

The parties are free in choosing the applicable law to international business contracts faces certain limits, which either:

• (PREVENTIVELY) RESTRICT their freedom (overriding mandatory rules that are directly applicable to the contract: e.g. import restrictions, antitrust provisions...);
• (SUBSEQUENTLY) PREVENT the chosen law to be applied to the matter concerned: public policy / order public. E.g. choice of a national law that does not ensure compensation for an agent upon termination...

Application of a certain national law to a certain agency: the agent is a subject who performs some activity on behalf of the principle of someone in another country. In some countries, agents are protected almost as the employees.

they receive an amount of money at the end > so we cannot use national law of other countries to regulate the contract because it means avoiding the specific protection provided from xx country on that category of people.

CONTRACTS

In Civil Law countries (all East Asia), Contract Law is divided in:

GENERAL AND SPECIAL LAW OF CONTRACTS

- GENERAL LAW OF CONTRACTS deals with the life and death of a contract in general. It covers their formation (how the contractual will is created and expressed by the party), object, form (how the contract take form, written/oral/mute), validity (reasons for which the contract can be considered null or invalid) or interpretation (termination); these rules are common to all contracts of any kind;

- SPECIAL LAW OF CONTRACTS regulates specific types of contracts ('contratti tipici'):

- SALE (di compravendita): a contract having as its object the transfer of ownership of a thing/good or the transfer of other rights in exchange for a price, art.1470 c.c.,

it is articulated in 30 articles, which explain this specific contract;

SUPPLY (di fornitura/somministrazione): a contract by which a party binds itself to supply another with things/goods continuously or periodically in exchange for a price, art.1559;

LEASE: a contract by which a party (lessor) binds itself to let the other (lessee) enjoy a movable or immovable thing/good for a given period of time at a fixed compensation, art.1571;

INDEPENDENT CONTRACTS (for works and services): contract by which a party (contractor) undertakes to perform a piece of work or render services, organizing the necessary means and operating at its own risk in return for compensation, art.1655;

AGENCY: a contract by which a party (agent) undertakes, in return for compensation, to promote the making of contracts on behalf of another party (principal) within a specified territory.

A SCALE OF CONTRACTS

As seen above, contractual types may be graduated on the basis of their contents, technical

characteristics, duration: from the simplest simultaneous exchange contracts (sale of movable goods) to the most complex investment projects.

SALE – SUPPLY – AGENCY – WORK – LICENSE – JOINT-VENTURE…

Art.1322 c.c. “The parties can freely determine the contents of a contract within the limits imposed by the law) sets the principle of contractual autonomy”.

Art.1323 states that “All contract, even though they are not of the types that are particularly regulated, are subject to the general rules contained in this Title”.

In practice, major business contracts are quite often a mix of different contractual types.

E.g. sale + contract for work + license of know-how = manufacturing and supply agreement.

CONTRACT FORMATION

The conclusion of a contract is the result of different phases:

• NEGOTIATION
• DRAFTING
• EXECUTION AND ENTRY INTO FORCE: the contract is finalized, concluded. The last phase of the contract implies the expression

of will of the parties > doesn’t mean that t