Overview

Contract is very important to human society,as Sir Henry Maine noted that “the movement of progressive societies has hitherto been a movement from status to contract.”1 In the globalized world,contracts involving foreign elements become the lifeblood of international commerce which play a vital role in modern society.Over centuries,scholars of private international law have made great efforts in solving the choice-of-law issues raised by contracts,and have developed all kinds of theories and doctrines in an attempt to find the ultimate solution.Nevertheless,contracts remain to be the most complex and confused area of choice-of-law problems.^[1]The complexity and confusion are caused by several reasons.

First,the contract laws of different countries differ dramatically.That is the reason why so many law schools provide a course entitled “comparative contract law.” Second,compared with other legal areas,contracts are more various in kind and involve more issues.2 For example,a contract of sale of goods has different features from an insurance contract or a contract of carriage of goods by sea.Should the same law govern regardless of the type of contracts involved,or do special features of particular contracts necessitate special choice of law rules? Moreover,a single contract may pose various problems,such as the capacity of the parties,the validity,the interpretation,the discharge and so on.This raises the question of whether the same law should govern all of these issues.As a result,some scholars prefer “dépeçage” which means different issues in a single contract are decided according to the laws of different states.Obviously,the variety of contracts and the flexibility of rules pose a number of difficulties to decide the applicable law for contracts.3 Third,there is the diversity of connecting factors that can be raised by the facts of the case: the place where the contract is made; the place of performance; the parties’ domicile,nationality or place of business; the situation of the subject matter and so on.4 The sheer multiplicity of connecting factors makes it hard to identify one single connecting factor as the determinant of the applicable law.

A more significant reason for the scholars’ signs of despair was the confusing diversity of conflict rules in solving the choice-of-law problems for contracts.As one would expect from the complex nature of the problem,a wide variety of different solutions have been advocated and tried over the years.However,such doctrinal multiplicity often causes more confusion and results in an increase in the uncertainty of the legal consequences that parties may have to encounter when dealing with such an issue.For instance,English law,until recently,applies the “proper law of the contract,” which is a succinct expression to describe the law governing many of the matters affecting a contract,however,English scholars have not reached consensus on the meaning of the term itself,as some scholars insist that it is defined as the law with which the contract has the closest factual connection,while others believe it is defined as the law chosen by the parties either expressly or implicitly.Another example,though party autonomy has been widely recognized as the primary principle in determining the applicable law for contracts,the substance and scope of this principle,however,differs from country to country.What’s more,in the situation where the parties fail to choose the law or to reach agreement on this issue,the applicable law issue could become a nightmare,not only to the parties but to their counsel and the judges as well.5

More strikingly,the development of the internet has significantly affected the ways with which business transactions are dealt.The free flow of information beyond national territorial boundaries and government control enables transactions to take place in “cyberspace”—a world in which the location of an event or the whereabouts of a person may not be readily identifiable.An immediate consequence of this is the difficulty in determining which law governs a transaction that took place in cyberspace.This is especially so because many current choice of law rules are focused primarily on geography.Thus,a call for rethinking the choice of law rules has emerged.Some have suggested exploring new foundations for choice of law as a whole.(https://www.daowen.com)

Though choice of law in contracts has been discussed and debated among the western scholars for centuries,in China it did not garner any attention until the country adopted a new policy of reform and opening up to the world in the late 1970s.There are at least two reasons for the under-development of conflict of laws in this field in China.The first is historical: during more than two thousand years of Chinese history,the country was basically a closed and self-sufficient society in which there was little need to engage in “foreign business transactions.” The second reason has to do with the philosophy of “socialist supremacy” that dominated the nation during the period between 1949 when the People’s Republic of China was founded and 1979 when the country initiated economic reform.Under this philosophy,state ownership reached almost every corner of the country and no individual or private person was permitted to participate in any business transactions,especially international ones.

Nevertheless,the last four decades have witnessed the amazing progress China has made in legislation,including the legislation concerning contracts.All of this effort was made in line with the country’s economic reform aimed at moving the nation towards the main stream of the world economy.As far as choice of law rules are concerned,contract is the area of law in which many of these rules were adopted.To be more specific,the first set of choice of law rules was provided in the 1985 Foreign Economic Contract Law,6 followed by the General Principles of Civil Law (the GPCL),promulgated in 1986.7 In 1999,when the Contract Act of China was adopted,the rules regarding choice of law in contracts were stipulated in Article 126.8 Paragraph 2 of this Article is now incorporated into Article 467(2) of the Civil Code of 2020.Needless to say,the Conflicts Act of 2010 includes contracts as well.

In addition,in order to implement the choice of law rules,the Supreme People’s Court issued several opinions or explanations concerning the determination of applicable law in contractual cases.^[2]More importantly,on July 23,2007,the Supreme People’s Court promulgated “Provisions on Several Issues Concerning the Application of Laws in Hearing the Cases Involving Foreign-related Civil or Commercial Contractual Disputes”(herein after referred to as “Provisions by Supreme Court”),which provides detailed stipulations.This piece of judicial explanation is regarded as a significant progress by Chinese scholars,which constitutes a major source for Chinese courts to refer to when they deal with contractual disputes involving foreign elements.Though this judicial interpretation was annulled by the SPC in 2013,it is still very helpful for us to understand how to determine the applicable law for a contract in an international civil litigation before a Chinese court.