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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

Marlow Co and Tisdale Co, in different countries, sign a supply contract stating: 'This contract is governed by the law of Country C.' Neither party has any connection with Country C. Under the general approach taken by most legal systems, what is the likely effect of this clause?

The clause will normally be respected. Most legal systems follow party autonomy, so an express choice of governing law is upheld even without a connection to that country, provided it is genuine and does not offend public policy or mandatory rules.

  1. AThe clause is void because the contract has no connection with Country C
  2. BThe clause will normally be respected as an express choice of law, subject to public policy limitsCorrect
  3. CThe clause only applies if both parties are companies incorporated in Country C

Explanation

Party autonomy is the general principle: an express choice of governing law is normally upheld even without a connection to the chosen country, provided it is bona fide and not contrary to public policy. It is not void for lack of connection, and incorporation in the chosen country is not required.

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