terça-feira, 20 de novembro de 2012

English Law for contracts with Brazil

Note: You might also want to read Choice of venue and applicable law in Brazil.

Finishing the blogging about my European tour, I have decided to take a shot at English Law and my complicated relationship with it. I will handle 3 subjects: good faith, financial contracts and UK law x CISG.

The English good faith

Brazilian Law – and I dare say every civil Law jurisdiction – maintains the principle of good faith as one of the cornerstones of its contract law.

Present as a tool of interpretation of contractual provisions and as a threshold for the conduct of parties in a contractual relationship, good faith holds its importance for ultimately being the way out for parties facing forms of injustice that were crystallized by the unfortunate wording of a contract or by the misconduct of the other party.

For a Brazilian lawyer such as myself, imagining contract law without the good faith principle is rather odd. Such uneasiness, however does not affect my fellow British common lawyers, who are used to the non-existence of the principle in their system.

The general and traditional reluctance of the English Courts to entertain the notion of good faith rests on two main arguments: its irreconcilability with freedom of contract (once the parties have agreed the terms of their agreement there is no necessity to imply an obligation of good faith), and secondly, that a duty of “good faith” would be vague and not easily defined, which gives room to uncertainty.

(Keep in mind I’m not an English lawyer, so this might be a very biased evaluation)

In spite of that, I hear the English Court of Appeal stated that English Law has developed piecemeal solutions in response to demonstrated problems of unfairness.

Also, where good faith clauses in contracts are able to define a sufficiently certain obligation, English courts have accepted its enforceability, even though not accepting the concept in general.

Finally, it seems that some contractual terms implied by statute, such as the goods being free and, under some business circumstances, of suitable quality, are acceptable and even mandatory, what is similar to say that some of the obligations usually associated with good faith are making its way into English law.

But I’m suspicious. That is why, whenever I’m dealing with English law, I will go the extra mile to describe all the obligations that a Brazilian would consider implicit in any agreement.

Financial Agreements

Well, this is going to be a short one: The English banks own the money, so the English law usually applies.  The Brazilian debtor usually lacks leverage to revert this.

English law x CISG

According to Brazilian Law, the parties may not freely choose the Law applicable to their contract. Brazilian jurisprudence is rather strict on the binding character of the Brazilian Conflict of Law Rules.
With the development of arbitration in the country, however, a window opened from such strict application of the Conflict of Law Rules. It has been understood that, in contracts with arbitration clauses, the parties are free to choose the applicable law.

In such a context, English Law has been the traditional option for international contracts; particularly the ones involving international trade of goods, for the English courts have centuries of head start in the development and consolidation of such rules.

A rising option, though, is the CISG (Vienna Convention of 1980), ratified by 78 States and currently under appreciation by the Brazilian Senate for ratification. Even though not as developed and consolidated as English Law, the CISG is especially attractive as a choice of law because of its international character and combination of civil law and common law features.

Both having their specific advantages, it is hard to say which would be the best option in general
Here is my usual dilemma: when to choose one over the other?

I have reached some specific conclusions, but a broad answer still eludes me.

Would my readers have any comments?

Um comentário:

  1. Russell S. Kurtz, ESQ. • That was a very informative article, Adler, and it was a pleasure reading it. I also enjoyed the comments that followed your posting. I would like to briefly comment on United States law as it pertains to the CISG, and matters of good faith.
    I am a lawyer from the United States, now living in Brazil, and I have worked on wind energy (energia eolica) procurement and sales contracts for blades, and towers, and numerous other components, and therefore I have also worked on contracts involving CISG issues. The United States is a current signatory to the CISG. As a matter of course, both Contracting States could simply stipulate that the CISG would not apply even in those situations where the CISG would otherwise automatically apply, i.e., Sales of Goods. However, what I found fascinating, was that even if one of the Contracting States might agree to be bound by the CISG, the situation could become much more complicated, because one of the Contracting States involved could have filed an Article 95 Declaration. With an Article 95 Declaration, a Contracting State excludes itself from being bound by Article 1(1)(b)of the CISG. The United States has filed such a Declaration.
    As everyone already knows, Article 1(1)(b) makes the CISG applicable to Sales of Goods. The significance of the Article 95 Declaration is that even if the subject matter of the contract would qualify for application of the CISG, the courts in the United States have the discretion to NOT apply the CISG in deciding a conflict of laws issue.
    Here is the direct Comment from the CISG, "[In evaluating article 1(1)(b), one should also consider the impact of an article 95 declaration by a Contracting State. Article 95 permits a Contracting State to declare that it will not by bound by article 1(1)(b).] , even if the parties did not remember to expressly stipulate in their contract that the CISG would not apply, and the subject matter was appropriate for the CISG, and a party was a Contracting State to the CISG, the CISG still might not apply."
    It is important to note that the United States is not the only Contracting State with an Article 95 Declaration in effect.
    As for the other matter, U.S. law may possibly appear somewhat different regarding the "good faith" issue in contracts. In every contract, as a matter of law, there exists the implied covenant of good faith and fair dealing. However, the parties are free to explicitly state that they will perform in a "good and workmanlike manner," use "reasonable efforts," "commercially reasonable efforts," or hopefully, that the party will exercise "good faith best efforts." Thus, while the existence of good faith is always implicit in every contract, the actual level of performance from a party could nevertheless be at either end of the spectrum.


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