Battle of the terms: Making sure your contracts work for you!

The Rome 1 Regulations 2009 (“Rome 1”) were introduced in December 2009 and these will have a huge impact on the vast majority of UK business.

Rome I

On 17th December 2009, Rome 1 was implemented to modernise the rules regulating which country's laws apply to a contract as provisions can be interpreted in different ways depending on which country's laws apply.

Business to Business

The Parties to a business contract are free to choose which country's laws apply however there are exceptions re contracts of: carriage; insurance; employment; and "overriding mandatory provisions" imposed to safeguard a country's public interest.

Where the parties fail to determine the governing law, Rome 1 can be employed to determine which country's laws apply. However, it is not advisable to rely on Rome 1 and parties should, wherever possible, determine the governing law during their negotiations and ensure the jurisdiction is expressly stated in the contract.

Consumer

Rome 1 will be most effective in relation to online trading. In consumer contracts (i.e. where the buyer is a private individual), though the contract will usually be subject to laws of the sellers' jurisdiction, the consumer has the benefit of their country's own consumer protection law where the criteria apply :

• If the seller pursues his commercial or professional activities in the consumer's country of residence; or

• If the seller in pursuing his commercial or professional activities directs such activities to the consumer's country of residence (i.e. offering choice of language on website; providing prices in differing currencies; or sets out delivery costs to different countries.)

Local consumer laws will now bind a number of UK sellers, and these may be more onerous than UK consumer protection.

The UK seller will have to consider whether to:

• accept the risk and comply;

• obtain legal advice in every jurisdiction where they ”pursue” or ‘direct' their activities; or

• stop trading outside the UK.

Please refer to the Ministry of Justice's guide on law applicable to contractual obligations (Rome I) here

If you would like to speak to someone about trading over the Internet please contact Sess Sigre.

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