International Business Law
(Shandong University Law
School)
姜作利
2003.8.22.
Lecture
1 International Business Law &
Its History
For undergraduates
1. Definition:
International
business law regulates various affairs of international business transaction
and international commercial organizations.
International
business law includes usually: contract law, sales law, company law, negotiable
instrument law, marine law, insurance law, etc.
2. History
Business law is
born and develops with the development of commodity economy.
Historically,
business law came into being during the ancient Roman period(B.C.700) as early
as 2600 years ago, but at that time business law was only a part of private
law. Modern international law refers chiefly to European business law which
originated from “ Law merchant” (商人习惯法) of Middle-Ages.
Law Merchant: (1) international (2)
explained not by court but by commercial organizations by merchants, which is
similar to what is called today international arbitration or mediation (调解);(3) disputes
are settled on base of fair and reasonable principles.
In today’s world,
different countries may have quite different legal systems: for example, civil
law, common law, socialist law, Islamic law, etc.
1. Civil law system:
Civil law system
established in continental Europe is based on a comprehensive code. Civil law
came from the Roman tradition and was codified in the sixth century in the
Justnian Code. In the eighteenth century, France codified the law into a civil,
commercial, penal, civil procedure and criminal procedure code. Other European
countries such as Germany and Switzerland followed with a codification of their
law. The colonization of Africa, Asia, and Latin America spread the civil law
system. However, some countries such as Japan , china simply adopted law based
upon the civil law model. The characteristics are
(1) to emphasize the
importance of written law
(a) all civil law
countries divide their laws into public law and private law
(b) to make
comprehensive code
(2) case bas no legal
validity
2. Common Law System
Common law system
is established in England and its former colonies such as USA, Canada. It evolves through case
precedent.(先例拘束力)。
The doctrine of
precedent (also known as stare decisis) provides that a judge or magistrate is
bound by (must follow) an earlier case decision of another court if
(1) that court is a
higher court in the same hierarchy as the lower court; and
(2) the facts of the
case before the higher court are the same as or very similar to those involved
in the lower court case.
These decisions
are known as binding precedents. Thus, decisions of the High Court are binding
on all courts in Australia as it is higher than all others.
Judges or magistrates are not bound by decisions regarding the same or
similar facts by another court if the decisions were made:
(1) outside their
hierarchy;
(2) at the same
level.
(3) Below their
level.
Judges are free
to make use of these non-binding decisions that are known as persuasive
precedents, There may, for example, be clear and impressive statements on the
major legal issues involved. In recent years the High Court has drawn upon
persuasiv precedents from international jurisdictions including the Supreme
Court of America.
During the
mid-fifth centuries ,Anglers and Saxons invaded England and established more
than 10 states with different local laws.
In 1066, William,
Duke of Normandy (a province in France) united the England. Soon, William established
a national court system and English royal court, and sent judges o local places
to hear cases. This developed into what is now called Common Law.
Equity Law:
Common law system required that a person who wants to make claim to the court
must have a “writ”(令状) from Chancellor (枢密大臣). But the “Provisions of
Oxford” (1258) prohibited the creation of new writs. The king ordered the
Chancellor to hear new cases, and the Chancellor had the right to ignore the
Common law, and hear the cases in accordance with the principle of fairness and
justice. Thus came into the equity law. Its special characteristics are
(1) specific
performance ( compensatory damages in common law)
(2) injunction
3. Difference
between the two legal systems
One judge
summarized the difference as follows:
If we may generalize, the European is
given to making plans, to regulating things in advance and therefore in terms
of drawing up rules and systematizing them. He approaches life with fixed ideas
and operates deductively. The Englishman improvises, never making a decision
until he has to …and so he is not given to abstract rules of law…But recently
the attitudes of common law and continental law have been drawing closer. On
the continent statute law is losing something of its primacy; lawyers no longer
see decision-making as a merely technical and automatic process, but accept the
comprehensive principles laid down by statute call for broad interpretation….
At the same time, the need for large scale planning and ordering of social
affairs has forced Anglo American law into using abstract norms.
Roman Law refers
to all the laws in the slave period of the Roman state, from 600B.C. to 565
A.D.(the death of Justinian I). The most important statute laws are “Twelve
Tables” and “Justinian Code”.(Giustiniano)
Some well-known
remarks:
(a) Engles: The roman
law is so perfect that we the modern men can hardly modify it substantially.
(b) Ihering(1818-1892
a German): The Romans conquered the world for three times : religion, force,
and law and the law conquer lasts the longest.
(c) A well-known
English: Rome is the first nation in history that ruled with law.
(I) History:
(a) period of
kingdom(753—510 BC)
(b) period of
republic(510—27BC)
(c) period of
empire(27BC-565)
(II)characters of
Italians
(a) equality
(b) kindness: Celsus
: Law is the art of fairness and kindness.
(c) Wise: American
soldiers
(d) Trustful:
(e) Romantic
(III) features of Roman
law
(a) equality
(b) private law
(c) profound theories
(d) detailed
(e) role of jurists
(IV) legal contributions of
Romans to the modern world
(a) to rule a state
with law
(b) Cicero: Rome had
created a legal system and an empire with equal wisdom.
(c) Equality as the
core of law
(d) Private law
(e) Law must be
detailed
(f) Role of jurists
Lecture 2
Validity of International Sales Contract
Under the common
law, a valid contract is an agreement that contains all of the essential
elements of a contract. As students of business law well know, a contract
contains a number of elements.
1. It is an
agreement between the parties entered into by their mutual assent (e,g., an
offer and acceptance of the contract’s material terms).
2. The contract must
be supported by legally sufficient consideration( e.g., the exchange in the
contract as bargained for by the parties).
3. The parties must
have legal capacity (e.g., that the parties are not minors, legally
incompetent, or under the influence of drugs or alcohol).
4. The contract must
not be for illegal purposes or to carry on an activity that is illegal or
contrary to public policy.
If a contract is missing any one of these essential elements, it is a void contract. It will not be enforced by the courts. The CISG only governs the forming of a contract and the rights and obligations of the seller and buyer. The CISG does not provide rules for determining whether a contract is valid, for determining whether a party to a contract is legally competent, nor for determining whether a party is guilty of fraud or misrepresentation. These rules are left to individual state or national laws.
trade usages
The courts of the
United States and many other common law countries will often look to the past
dealings of the parties and to trade usages for guidance in interpreting
contracts or filling the gaps. Trade usages are derived from the customs of an
industry, the practices of merchants in their past dealings, and the usages of
trade terminology and language.
Courts,
lawyers, and trade negotiators in some developing countries do not rely on
trade usages to interpret contracts, because of their widespread belief that
many customs and trade usages were derived from the practices of European
trading nations and colonial powers. When they traded in Africa, the
Mediterranean, or the Caribbean, these merchants established their trade usages
and practices there.
Trade Usages
under the CISG
The CISG
provisions of Article 9 more closely resemble the way trade usages are handled
under American law. The only trade usages that can be used to interpret or fill
in the gaps in a contract are (1) those to which the parties agree to be bound
or that derive from their past dealings, or (2) those usages of which the
parties knew or ought to have known and that are regularly observed in the
industry or trade involved.
The contract laws
of all countries require that the parties reach a mutual agreement and
understanding about the essential terms of a contract. This agreement is
reached through the bargaining process, between offeror and offeree. The
offeror, by making the offer, creates in the offeree the power of acceptance,
or the power to form a contract.
I. An offer must
meet the following requirement
(1) to indicate the
intention to be bound. The contract forms at the time of accepting the offer.
“Chinese
Longjing Tea 10 T,$CIF New York 1000 per T, payment by irrevocable L/C, valid
for 7 days.”
If
in the above offer there is a sentence “the price is subject to our final
confirmation”, it is not an offer . It is an invitation for offer.
Invitation
offer: to invite others to make an offer, for example, quotation, price lists,
catalogue which are to invite the others to place orders, and these orders are
offer.
(2) most nations hold
that an offer must be addressed to one or more
specific
persons. In those countries, an advertisement can never create the power of
acceptance in a member of the public who reads the ad. In Germany, for
instance, advertisements addressed to the public in general are mere
invitations to deal. Other countries, such as the United States, recognize that
if an advertisement is specific enough in describing the goods, their quantity,
and price, it may be considered an offer. The CISG takes a middle position by
creating a presumption that an advertisement or circular is not an offer
“unless the contrary is clearly indicated by the person ,making the proposal.”
Nevertheless, a seller may want to include in all of its price sheets and
literature a notice that the material does not constitute an offer.
(3) an offer must be
sufficiently definite , e.g., to include main conditions of a contract.
CISG
holds that an offer is considered sufficiently definite if it (a) indicates or
describes the goods; (b) expressly or implicitly specifies the quantity, and
(c) expressly or implicitly specifies the price for the goods.
However,
one should not think that the presence of these three terms always indicate a
contract. In many international contracts involving a great deal lot of money,
no firm would make a commitment without reaching an agreement on many other
terms, such as methods of payment, delivery dates, quality standards, etc. In
this case, the court will try to find whether the parties had the intention to
be bound, if the court finds the parties did have the intention to be bound ,it
can supply many of the
missing terms by looking at the past dealings of the parties, and at customs in
the trade or industry, or by referring to the applicable provisions of the
CISG.
Open
Price Terms(开口价)：Merchants often fail to include price terms in the chain of
correspondence or communications making up a contract.
UCC states that if price is not
specified, a “reasonable price” will be presumed. Under this flexible approach,
the contract does not fail.
Case 2 A, a boss of a
flower shop, phoned B(a flower wholesaler) to deliver 500 bunches of flowers
the next afternoon. A refused to accept the flowers with the excuse that there
doesn’t exist a contract. The court held that A lost the suit and B was
entitled damages.
Case 3 A told B that he
was ready to sell him a second-hand Benz 200 car. B accepted but A refused
because he argued that there was no contract. The court held that there was no
contract because the price couldn’t be decided.
Open price
terms are not favored in developing countries because they are major exporters
of agricultural commodities, minerals, and other raw materials subject to a
highly fluctuating market. Even in most civil law nations, such as France, a
sales price must be sufficiently definite in order for a contract to be valid.
CISG seems
similar to those of U.S. state law. Article 55 states that where price is not
fixed, the price will be that charged “for such goods sold under comparable
circumstances in the trade concerned.” Accordingly, if the buyer and seller
fail to specify the price of the goods, a court might be able to look to the
trade to make its own determination of price, and the contract and all its
other provisions will remain in effect.
(4) an offer becomes
valid when it arrives at the offeree.
Cross-offer
is a counteroffer and isn’t valid.
II.
the binding of an offer
(1) As a general
rule, an offer isn’t binding on the offeree. If the offeree doesn’t accept it,
he has no obligation to give a notice to the offeror.
(2) whether or not an
offer is binding on the offeror is rather complex..
(A) Common Law
countries:
An
offer generally isn’t binding on the offeror, and the offeror can withdraw the
offer at any time before the offeree’s acceptance.
Reasons: (a) it lacks consideration
(b) it isn’t signed
and sealed(签字腊封).
Obviously, the
above stipulation doesn’t meet the development of modern economic life. UC C
(2—205) has improved this and holds that an offer can’t be revoked if (a) the offeror is merchant (b) if has
a period of validity (c) the offer must be in writing and the offer must sign
on it.
(B) Germany law holds
that an offer is binding on the offeror.
(C) French law holds
that the offeror can revoke the offer before the acceptance of the offeree.
(D) CISG (Article
14):
(1) Until a contract is
concluded an offer may be revoked if the revocation reaches offeree before he
has dispatched an acceptance
(2)However, an offer can’t be revoked,
(a) If it indicates,
whether by stating a fixed time for acceptance or otherwise, that it is
irrevocable or
(b) If it was
reasonable for the offeree to rely on the offer as being irrevocable and the
offeree has acted in reliance on the offer.
A contract isn’t
formed until the offer is accepted by the offeree. The acceptance is the
offeree’s manifestation of the intention to be bound to the terms of the offer.
In all legal systems, the offeree may accept at any time until the offer is
revoked by the offeror, until the offer expires due to the passage of time,
until it is rejected by the offeree, until the offeree makes a counteroffer, or
until termination in some other manner.
Under the CISG
, an acceptance may take the form of a statement or any other conduct by the
offeree that indicates the offeree’s intention to be bound to the contract.
I. Valid Acceptance:
(1) an acceptance
must be made by the offeree.
an acceptance
must be made within the period of validity.
(late
acceptance is a counteroffer only)
(2) an acceptance
must match the terms of the offer exactly and
unequivocally.
Otherwise it is considered a counteroffer and thus a rejection of the original
offer.
Mirror
Image Rule: Most countries of the
world, especially UK, including the western European countries. Follow the
mirror image rule. The rule requires that an offeree respond to an offer with
an acceptance that is definite and unconditional, and that matches the terms of
the offer exactly and unequivocally. Under these laws, a purported acceptance
that contains different or additional terms is considered a counteroffer and
thus a rejection of the original offer.
II .Time of
validity of acceptance
(1) Mail-box rule:
under the common law, a contract is formed when the acceptance is dispatched by
the offeree. In the case of an acceptance by letter, the time of dispatch is
the time the letter is put into the hands of the postal authorities.
This rule
assumes that the correct mode of transmission is used, i.e., one that the offeror
specifies or, if none, one that is reasonable under the circumstances.
(2) Received letter
of acceptance: civil law countries especially German law holds that a contract
is formed when the acceptance arrives at the offeror.
(3) Knowledge of the
letter of acceptance: some civil law countries such as Italy.
(III)
Formation of oral contract under UCC
1. A. Do you want to
buy my car for $500?
B. Yes, I take
it.
Contract.
2. A. Do ……?
B. I must go back
home to ask my wife. Yes, I take it (after 5 minutes).
No contract because oral offer dies at
the end of conversation.
3. A. Do…….?
B. says nothing.
A.