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

Zentra Ltd, based in Country A, agrees to sell machinery to Boreal Inc, based in Country B. The contract says nothing about which country's law governs it. A dispute arises and is brought before a court. Which of the following best describes how the court will decide the governing law?

The court uses conflict of laws rules, also called private international law, to decide which country's law governs the contract. Silence on governing law does not stop the case being heard, and there is no automatic rule that the buyer's law applies.

  1. AIt will apply the rules of conflict of laws (private international law) to identify the applicable national lawCorrect
  2. BIt will always apply the law of the buyer's country
  3. CIt will refuse to hear the case because the contract is silent on governing law

Explanation

Where parties have not chosen a governing law, the court applies its conflict of laws rules to decide which legal system governs the contract. There is no automatic rule favouring the buyer's country, and silence on governing law does not prevent a court hearing the case.

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