International Business Law

By Bernice Owens,2014-08-28 10:15
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International Business Law

    International Business Law



    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


    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


Lecture 2 Civil law system & Common law system

    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.

    Lecture 1 Roman Law

    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


    (I) History:

    (a) period of kingdom(753510 BC)

    (b) period of republic(51027BC)

    (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


    (c) Equality as the core of law

    (d) Private law

    (e) Law must be detailed

    (f) Role of jurists

    Chapter One Contract Law

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.

Lecture 3 Entering the agreement: the offer

     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


     most nations hold that an offer must be addressed to one or more (2)

    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.

     an offer becomes valid when it arrives at the offeree. (4)

    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 (2205) 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


Lecture 4 Entering the Agreement: the acceptance

    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


    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


    (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


    (III) Formation of oral contract under UCC

    1. A. Do you want to buy my car for $500?

    B. Yes, I take it.


    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. (to C ) Do you……?

    B. yes, I take it.

     No contract because by the time you ask C, your offer to B dies.

    4. A. Do you……?

    B.No. Yes(a few minutes later).

    No contract because B‟s No is rejection and it kills the offer.

    5. A. Do……? I‟d like to keep my offer open until Dece,1.

    B.says No on Nove. 29, and then says Yes on Nov. 30.

    No contract because a rejection kills an offer even if it has a fixed time of


    6. A. Do ……?

    B. No, but I give $400, (then says) yes I take it for $500.

    No contract because $400 is a counteroffer and it kills the original offer.

    “yes, I take it at $500 ” is a new offer, the acceptance is on the original


    7. A. I give you an offer in writing to sell my car for $500.

    B. I take it within two days.

     Contract because your offer is in writing and I can accept it in a reasonable

    time. Two days might be considered as a reasonable time.

Lecture 5 Battle of Forms

     The mirror image rule requires that an acceptance be unconditional and that it

    not attempt to change any of the terms proposed in the offer. These requirements

    present special problems when both parties, buyer and seller, negotiate back and forth

    via “standard” business forms.

     In many big companies in most western countries ,seller and buyer often make

    use of standard business forms. Th seller might rely on an order confirmation form or

    sales form. The buyer might make use of a preprinted purchase order form used to

    place orders with all vendors. Typically, these forms leave room on the front so the

    parties may insert important contract terms such as price, quality, or ship date. The

    reverse side often contains detailed provisions or standard clauses, often called terms

    and conditions, or general conditions of sale. They are often drafted by attorneys to

    protect their client‟s rights, placing greater liability on the other party.

    In international trade practices, both parties may not even be aware of the legal

    significance of these seldom read provisions on the reverse side, because they usually

    read carefully the crucial terms. Usually the preprinted terms on these forms differ,

    sometimes in significant ways. Here are several examples of how they might differ

    ? Buyer‟s purchase order might call for disputes to be resolved in the buyer‟s

    country . Seller‟s confirmation calls for disputes to be heard in the courts of

    the seller‟s country.

    ? Buyer‟s purchase order requires shipment by a certain date named in the

    order. Seller‟s confirmation allows a grace period for late shipping or

    provides for excuses for late shipment.

    This potential for conflict is almost endless. When this occurs, lawyers call it a

    battle of forms.

    I. UCC (2-207):

    1. “A written confirmation which is sent within a reasonable time operates

    as an acceptance even though it states terms additional to of different

    from those” in the purchase order, unless the confirmation “is expressly

    made conditional on assent to the additional or different terms.”

    2. If both parties are merchants, any additional terms contained in the

    seller‟s confirmation automatically become a part of the contract unless:

    (a) The buyer‟s purchase order “expressly limits acceptance” to the

    terms in that order;

    (b) The additional terms in the confirmation “materially alter” the terms

    of the order, or

    (c) The buyer notifies the seller of an objection to the additional terms

    within a reasonable time after receiving the confirmation containing

    the new terms.

     UCC shows that

    (1) If ,between merchants, an acceptance contains additional terms that

    reflect only minor changes from the buyer‟s order will be effective to

    produce a contract, and the minor terms become a part of it (unless the

    buyer notifies the seller of an objection to the new term).A minor term

    might be one that is in usual and customary usage in the trade.

     If the acceptance materially alters the offer, the contract forms but the

    additional terms contained in the acceptance don‟t become a part of the contract.

     A material term is generally considered to be one that is not

    commonly accepted in the trade and that would result in surprise hardship

    to one party if unilaterally included in the contract by the party.

    In Case 5 ,suppose that the buyer adds an additional clause on the

    reverse side of the confirmation, and it states “ all disputes are to be

    resolved in arbitration before the International Chamber of Commerce

    in Paris”. In this situation, the contract will be formed without the new


     The theory of who fire the last shot:

     The case precedent for this theory is BRS V. Crutchley(1967). When

    both parties stick to using his own clauses, if one party still holds on using his own,

    but another party no longer holds on. In this case, the one who still sticks to his

    clauses is the one who fires the last shot. And the contract should be based his clauses.

    II. CISG

    The CISG rules fall somewhere between the rules set out by the common

    and civil law and the UCC. In an international sales transaction governed by

    the CISG , an acceptance containing new terms that do not materially alter the

    terms of the offer becomes a part of the contract, unless the offeror promptly

    objects to the change. However, an acceptance that contains additional or

    different terms that do materially alter the terms of the offer would constitute

    a rejection of the offer and a counteroffer. No contract would arise at all unless

    the offeror in return accepts all of the terms of the counteroffer ( recall that

    under the UCC a contract would arise, but without the new terms.)

    Unlike the UCC, the CISG states those key elements of a contract that

    will materially alter a contract: price, payment, quality and quantity of goods,

    place and time of delivery, extent of one party‟s liability to the other, and

    settlement of disputes. Thus, under the CISG, almost any new or different

    term in the acceptance could constitute a counteroffer.

    Attention: How to solve disputes on the formation of a contract?

    (1) If we are offeror, we must refuse possible new terms in

    The acceptance timely, even though the new terms don‟t

    materially alter the offer. Under CISG, the refusal of the

    New terms kills the offer and becomes a counteroffer.


     Lecture 6 Consideration

     Rules of Consideration

    1. Consideration is essential to the validity of every simple contract

    2. Consideration must have a value that is recognized by the law but need not

    be equal to the promise.

    This principle is sometimes explained as “consideration need not be equal to

    the promise” or “consideration may not be adequate but it must be sufficient.”

    In other words, the consideration is not adequate in terms of market value but

    it has a value that is recognized by the law; that is, it has some sufficient value.

    3. Consideration must be present or future and cannot be past

    (1) executory (future) consideration

    Both promises are to be executed in the future:

     A promises to supple goods, B promises to pay.

     (2). Executed (present) consideration

     A offered a reward for a lost dog, B returns the dog and gets the


    (3)past consideration

    Past consideration is no consideration at all because it happens after an

    act has already been performed.

    When a person returns a lost dog and the gleeful owner promises a

    reward, that promise cannot be enforced by law because the act of

    returning the dog occurred before the reward was promised and was

    therefore not based on the offer of a reward.

     (4)Consideration must be possible to perform

     A promise to do the impossible would not be accepted as


     (5)Consideration must be lawful

     (6)Consideration must move from the promisee

     In cases where a promise is made to more than one person and only

    one of those persons has provided the consideration, all the promisees have

    acquired rights under the contract.

     (7) Consideration must not be too vague

     (8) moral obligation isn‟t consideration

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