Convention On The Law Applicable To Contractual Obligations 1980 - Scope of The Convention

Scope of The Convention

Under Article 1, the Convention's rules are to apply to all choice of law issues involving contractual obligations and, under Article 10, once selected, the lex causae will govern:

(a) interpretation;

(b) performance but, in relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the lex loci solutionis, i.e. law of the place in which performance takes place;

(c) within the limits of the powers conferred on the forum court by its procedural law, the consequences of breach, including the assessment of damages in so far as it is governed by rules of law;

(d) the various ways of extinguishing obligations, and the limitation of actions; and

(e) the consequences of nullity of the contract.

Article 15 excludes the operation of renvoi. In addition, a number of issues with a separate characterisation are excluded, namely:

• the status or capacity of natural persons. Article 11 covers the situation where two persons physically present in the same state make a contract, and both parties have capacity under the lex loci contractus. One party cannot invoke incapacity under another law unless the other party was aware of this incapacity at the time the contract was made or was not aware of the incapacity as a result of negligence.
• contractual obligations relating to succession and all rights claimed in property in a marriage or family relationship, particularly where the question of the entitlement of any child who is illegitimate is raised.
• obligations arising under negotiable instruments including bills of exchange, cheques, and promissory notes and connected to their negotiable character;
• arbitration agreements and agreements on the choice of court (see arbitration clauses and forum selection clauses);
• questions governed by the law of companies and other bodies corporate or unincorporate such as the creation, by registration or otherwise, legal capacity, internal organisation or winding up of companies and other bodies corporate or unincorporate, and the personal liability of officers and members for the obligations of the company or body;
• the question whether an agent is able to bind a principal, or an organ to bind a company or body corporate or unincorporate, to a third party;
• the constitution of trusts and the relationship between settlors, trustees and beneficiaries (see trusts (conflict));
• evidence and procedure save that, under Article 14, the Applicable Law applies to the extent that it contains, in the law of contract, rules which raise presumptions of law or determine the burden of proof. Thus, under Article 14 (2) a contract or an act intended to have legal effect may be proved by any mode of proof recognised by the lex fori or by any of the laws referred to in Article 9 under which that contract or act is formally valid, provided that such mode of proof can be administered by the forum court.
• the question of whether a contracts of insurance covers a risk situated in the territories of one of the Member States is determined under the municipal law of the relevant states. This exclusion does not apply to contracts of reinsurance.