1、International Contracts Common Law and Civil Law Juliet Reingold Sascha Kuhn Ariel Nachman Simmons & Simmons Tel Aviv, Israel 16 June 2010,ACC ISRAEL ANNUAL CONFERENCE,International contracts common law and civil law,Comparison common law - v - civil law systems Drafting styles Concept of good faith
2、 Differences at the pre-contract stage Substantive differences in contractual terms in common law and civil law contracts,Comparison: common law versus civil law systems,Drafting styles and techniques,The style of negotiating and drafting documents varies from legal system to legal system Rules of i
3、nterpretation mean that parties to common law contracts are encouraged to specifically cover every detail, whereas a more all-encompassing spirit of the agreement approach is taken in civil jurisdictions As business becomes increasingly international, there is a trend towards a standardisation of co
4、ntract terms BUT it is important to understand the different approaches taken, so as to ensure clarity and avoid ambiguity,Role of good faith in the two legal systems,One of the fundamental differences between common and civil law contracts Good faith not recognised in English law Freedom of contrac
5、t But Misrepresentation, Mistake, Duress, Illegality, Frustration Statute Civil law jurisdictions often actively impose good faith type duties Italy: duty to negotiate in good faith Germany: contracts interpreted with trust and good faith (Treu und Glauben),Role of good faith in the two legal system
6、s (continued),If a Party is required to act in good faith under civil law, there could be increased obligation to: inform the other side of all relevant points that it could not discover otherwise during negotiation observe reasonable diligence in the performance of pre-contractual and contractual o
7、bligations exercise caution when varying terms in pre-contractual letters of intent or withdrawing from negotiations without reasonable justification May need to manage the role of good faith: Negotiating specific circumstances in which party will be liable for damages if negotiations breakdown Try
8、to avoid references to negotiating or acting in good faith,Differences at the early stages Pre-contractual obligations,Common Law No liability if negotiations break down Agreements to agree are not legally enforceable,Civil Law Some jurisdictions allow liability for unfairly breaking off negotiation
9、s (for example France or Germany) Commencement of negotiations can itself lead to contractual relationship between parties (i.e. Germanys vorvertragliches Schuldverhltnis),NB: Common and Civil jurisdictions both have remedies for mistake and misrepresentation,Differences at the early stages Negotiat
10、ions,Common Law Detail needs to be spelled out hard to get wording changed or rectified at a later stage by the English courts Entire agreement clauses mean that English courts will not look behind contract to negotiations to aid interpretation,Civil Law Emphasis on the common intention of the parti
11、es even provisions that are clear can be modified if they do not properly reflect the intentions Discussions and pre-contractual negotiations are used to assist interpretation,Differences in the substance of a contract drafted under common law as opposed to civil law Description of Parties/Recitals,
12、English Law It is usual to provide a brief description of the Parties, including the full legal name of the contracting entity, its address and place of incorporation Recitals are considered subordinate to the main body of the contract, and so less emphasis is put on them when a dispute arises,Germa
13、n / Italian Law More elaborate descriptions of the Parties are often given, including details from the Company register, tax identification codes, and power of attorney information Recitals are seen as the basis of the contract and are absolutely crucial in any interpretation following a dispute,Sig
14、natories,Both common and civil jurisdictions have individual quirks Often need to check specific jurisdiction/seek the advice of local counsel EU legislation provides that an EU Companys directors have authority to sign, so there is some reassurance In Germany, need to ensure the Companys constituti
15、onal documents grant those who are acting on behalf of the organisation the power to bind it Power of Attorneys and signing authorities need to be scrutinised,Consideration,Price and other terms,Gap-filling,Most legal systems will void a contract if not sufficiently certain, but there are usually le
16、gal provisions for filling in the gaps,Penalty Clauses/Liquidated Damages,Exclusion of liability,Force majeure,Unilateral changes to the contract,Third party rights,Special contract counterparties i.e. government,Avoiding the pitfalls,False Friends words look the same but have different meanings (i.
17、e. execution of a contract signature or performance?) Even similar legal concepts may differ a lot in detail quote the exact term; provide a good translation of the legal concept Be aware of Euro English Keep things short and simple In negotiations, be sure to explain exactly what you mean if wordin
18、g is in two different languages,Conclusion,As transactions become increasingly complex, we are more likely to operate in unfamiliar jurisdictions It is crucial to be aware of the areas where there may be significant differences between the law we are used to and the law we are working with We have e
19、xamined a few areas today, but there are others so vigilance is needed It is necessary to inform our commercial colleagues of areas where their normal expectations may not apply and to alert them to areas where extra care is needed It is also important to understand how factors inherent in different legal systems influence the way contracts get negotiated and drafted so as to make the contracting process as effective as possible,Any questions please contact: juliet.reingoldsimmons- sascha.kuhnsimmons- ariel.nachmansimmons-,
