Parties' Choice of Law in E-Consumer Contracts

Journal of Private International Law

Volumn 3, Issue 1, 2007, Pages 113-136

  Tang, Zheng ^a  

^a UNIVERSITY OF ABERDEEN   (United Kingdom)

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EID: 60349123240     PISSN: 17441048     EISSN: 17578418     Source Type: Journal    
DOI: 10.1080/17536235.2007.11424319     Document Type: Article

References (131)

1. SP, North and J, Fawcett, Cheshire and North's Private International Law (hereafter “Cheshire & North“) (London, Butterworths, 13th ed), 533–34
2. Cheshire & North, 553; P Nygh, Autonomy in International Contracts (Oxford University Press, 1999), 2
3. Cheshire & North, 553; Nygh, supra n 2, 2–3; Restatement 2nd Conflict of Laws (St Paul, American Law Institute Pub, 1996), s 187
4. This principle had been accepted in European countries for many years: see M Giuliano and P Lagarde, “Report on the Convention on the Law Applicable to Contractual Obligations” (hereafter “Giuliano & Lagarde Report”) OJ 1980 C282/1, 15–16. It has been adopted in the EC Convention on the Law Applicable to Contractual Obligations 1980 (Rome Convention), Art 3. For more international conventions, see United Nations Convention on Contracts for the Inter national Sale of Goods (1980), Art 6; Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods (Hague Sales Convention 1955), Art 2; Hague Convention of 22 December 1986 on the Law Applicable to International Sales of Goods 1986 (Hague Sales Convention 1986), Art 7; Inter-American Convention on the Law Applicable to International Contracts 1994 (Inter-American Convention), Art 7.1
5. See Z, Tang, “Exclusive Choice of Forum Clauses and Consumer Contracts in E-commerce” (2005) 1 Journal of Private International Law 237, 239–40
6. 6 UCC, ss 1–301(e)(1).,
7. Green paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM(2002)(0654 final), 3.2.7.3, solution viii, at 32. The proposal for a regulation of the European Parliament and the Council on the law applicable to contractual obligations (hereafter “Rome I proposal”) was issued on 15th December 2005, COM(2005)650 final. This approach, however, has not been adopted by the Rome I Regulation proposal
8. Private International Law Statute of Switzerland, 1980, Art 121(3)
9. C, Reed, Internet Law: Text and Materials (Cambridge University Press, 2004), 223–30. J Fawcett, J Harris and M Bridge, International Sale of Goods in the Conflict of Laws (Oxford University Press, 2005), 1224–52
10. Ibid
11. 11 The law of the business's habitual residence may provide higher consumer protection standards than the law of the consumer's habitual residence
12. 12 Amazon Europe supports this approach by claiming that it will not undermine the wealth of EU-level consumer protection laws and also provides great certainty to businesses. See Response of Amazon Europe to Green Paper
13. Many consumers even have no sufficient knowledge of the consumer law in their own country
14. Green Paper, supra n 7, para 3.2.7.3, solution viii
15. Ibid
16. Ibid
17. 17 Other general limitation is permitted, such as limitation provided by the mandatory rules and public policy of the forum
18. Vita Food Products Inc v Unus Shipping Co [1939] AC 277
19. See infra Section C.,
20. For the US cases, see Jeffrey, Stenzel et al v Dell, Inc, et al 870 A 2d 133 (Supreme Judicial Court of Maine held the applicable-law agreement in consumer contracts choosing the law of the seller's state is effective); Discover Bank v Superior Court 36 Cal 4th 148 (2005) (Supreme Court of California held that the choice-of-law agreement in consumer contracts is not enforceable because it is contrary to California's fundamental policy). See also Restatement 2nd, supra n 3, s 187(2)
21. 21 See, eg, General Council of the Bar of England and Wales, Response to EC Green Paper, para 24.,
22. The general requirement as to a valid choice has been made in the landmark case M/S Bremen v Zapata Off-Shore Co, 407 US 1 (1972). Although this is a case concerning a choice-of-forum clause, the general prerequisites are equally adapted to a choice-of-law agreement
23. Carnival Cruise Lines, 499 US at 595; Bremen, 407 US at 12–13, 15, 18
24. Blake v Biscardi, 62 AD 2d 975 (1978) at 977; Leasing Service Group v Broetje, 545 F Supp 362 (1982), 366. US Uniform Commercial Code, s 2–302 provides rules on unconscionable agreements in consumer contracts
25. Szetela v Discover Bank, 97 Cal App 4th 1094; Kinney v United Health Care Services, Inc 70 Cal App 4th 1322; Neal v State Farm Ins So 199 CalApp 2d 690
26. Leasing Service Group v Broetje, 545 F Supp 362 (1982); Specht v Netscape Communications, 306 F 3d 17 (2nd Cir 2002)
27. Restatement 2nd Conflict of Laws, supra n 3, s 187, comment b
28. For more details, see Tang, supra n 5, 342–55; C Kunz, J Ottaviani, E Ziff, J Moringiello, K Porter and J Debrow, “Browse-wrap Agreements: Validity of Implied Assent in Electronic Form Agreements” (2003) 59 Business Lawyer 279; C Kunz, H Thayer, M Del Duca and J Debrow, “Click-Through Agreements: Strategies for Avoiding Disputes on Validity of Assent” (2001) 57 Business Lawyer 401
29. Pollstar v Gigmania, 170 F Supp 2d 974 (ED Cal 2000), at 981 (the California district court held the agreement between two professionals present in small grey print on a grey background was conscionable)
30. See R, Hillman and J, Rachlinski, “Standard Form Contracting in the Electronic Age” (2002) 77 New York University Law Review 429, 456–60; A O'Hara, “Choice of Law for Internet Transactions: The Uneasy Case for Online Consumer Protection” (2005) 153 University of Pennsylvania Law Review 1883, 1936
31. For similar requirements for choice of court agreements, see Tang, supra n 5, 249–55
32. O'Hara, supra n 30, 1938
33. See also supra Section B
34. Bush v National School Studios, Inc, 139 Wis 2d 635 (1987), 642, which provides that the choice- of-law agreement cannot be enforced “at the expense of important public policies of a state whose law would be applied if the parties choice of law provision were disregarded”; SG Cowen Securities Co v Messih, 00 Civ 3228 (HB) (SDNY 2000)
35. Bush, supra, n 34
36. Bush, supra, n 34, pp. 639, 644–5 (refusing to enforce the parties' choice of law clause designating Minnesota law on the ground of the strong public policy represented by Wisconsin's fair dealership laws); Beilfuss v Huffy Co, 274 Wis 2d 500 (2004), 506–09
37. 123 Cal App 4th 1283.,
38. Edelist v MBNA America Bank, (2001) 790 A.2d 1249, at. 1260–1; Johnson v West Suburban Bank (3d Cir. 2000) 225 F.3d 366, at 367
39. Klussman, supra n 27, 1293
40. Ibid, 1298
41. Ibid
42. Ibid, 1299
43. See ibid, 1298, and Discover Bank v the Superior Court, 36 Cal Rptr 3d 456, at 461–62
44. Fawcett et al, supra n 9, 543–46
45. 45 36 Cal Rptr 3d 456
46. 46 36 Cal Rptr 3d 456, 461–62
47. Ibid
48. Klussman, supra n 37, at 1299
49. Potomac Leasing Co v Chuck's Pub, Inc, 156 Ill App 3d 755 (1987)
50. Champagnie v WE O'Neil Constr Co, 77 Ill App 3d 136 (1979)
51. Ibid
52. See, eg, Demitropoulos v Bank One Milwaukee, NA, 915 F Supp 1399, (1996) 1414; Midway Home Entertainment Inc v Atwood Richards Inc, 1998 WL 7741 23 (ND Ill), 3
53. Scheifley v Capitol One Bank, No CV 03–2801RBL (W.D.Wash. filed 25 June 2004)
54. Giuliano and Lagarde Report, supra n 4, 38
55. In Discover Bank v the Superior Court, 36 Cal Rptr 3d 456, the Court of Appeal avoided deciding the difficult question as to whether the class action waiver agreement violated California's public policy
56. Wilson v Sawyer, 106 So 2d 831 (La Ct App 1958), 833
57. See Hague Draft Convention on the Law Applicable to Certain Consumer Sales 1980 (Hague Consumer Sale), Art 6; Australian Private International Law Statute 1978, Art 41; Quebec Code Civil, Art 3117; Uniform Computer Information Transactions Act (UCITA), s 109(a); Uniform Law Conference of Canada, Uniform Jurisdiction and Choice of Law Rules for Consumer Contracts, Part X, para 7; Rome Convention, Art 5(2), despite the recent Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005) 650 final
58. See, eg, Nygh, supra n 2, 158, and footnote 111 therein. The Law Society of England and Wales EU Committee's response to the Green Paper describes this approach as “the only way to protect freedom of contract, promote trade, and grant adequate protection” for the consumer
59. 59 The Rome Convention, Art 5(2); Hague Consumers Sales, Art 6; Civil Code of Quebec, Art 3117
60. Rome Convention, Art 3(3); Cheshire & North, supra n 1, 576
61. Those rules of law cannot be derogated from by agreement where a given law is applicable. There are also international mandatory rules, which are rules that cannot be derogated from by the parties' agreement regardless of the applicable law. The former category is the mandatory rules we need to discuss in this section. For further discussion on basic theories on mandatory rules, see generally Cheshire & North, supra n 1, 575–84; Fawcett et al, supra n 9, 760–64; etc
62. Cheshire & North, supra n 1, 575–76; A Jaffey, “The English Proper Law Doctrine and the EEC Convention” (1984) 33 International and Comparative Law Quarterly 531, 538; C Morse, “Consumer Contracts, Employment Contracts and the Rome Convention” (1991) 41 International Comparative Law Quarterly 1
63. Amazon.com, supra 12, paper 18
64. Nygh, supra n 2, 157; Cheshire & North, supra n 1, 576
65. See Cheshire & North, supra n 1, 579–81
66. S 27(2), Unfair Contract Terms Act 1977
67. S 173(1) of the Consumer Credit Act 1974
68. Nygh, supra n 2, 210
69. Eg, in Sayers v International Drilling Co NV [1971] 3 All ER 163, the Court of Appeal did not give the protective rules for employees in the Law Reform (Personal Injuries) Act 1948 overriding effect
70. 70 It has to be noted that this is also the problem of applying most substantive law created before e-commerce to e-contracts
71. 71 See s 5, s 6(2), s 7. However, although s 26 states that this Act does not apply to the contract of sale of goods in the international sense, it only indicates that ss 2–7 of the Act are not inter national mandatory rules, which will still be applied as domestic mandatory rules if providing higher protection to the consumers according to the preferential law approach.,
72. See, in general, Fawcett et al, supra n 9, 513; F Debussere, “International Jurisdiction Over E-Consumer Contracts in the European Union: Quid Novi Sub Sole?” (2002) 10 Computers and Information Technology 344, and nn 31–36 therein; Reed, supra 9, 182; Advent Systems Ltd v Unisys Corp 925 F 2d 670 (1991 Pa); Oberlandesgericht, Koblenz, of 17 Septmeber 1993 (cisg3.law-pace.edu/cases/930917gi.html)
73. This is also a problem of dépeçage, see infra subsection C.2
74. This term refers to the situation where substantive laws from different legal systems govern differ ent parts of the contracts. See Nygh, supra n 2, 122–3; Cheshire & North, supra n 1, 49–50, 553–54
75. Dicey, Morris & Collins: the Conflict of Laws (London, Sweet & Maxwell, 14th edn, 2006), 1640; Morse, supra n 62, 8–9; Nygh, supra 2, 156–58
76. Nygh, ibid, 158
77. See supra Section C.1(b)
78. Amazon, supra n 12, para 14
79. General Council of the Bar of England and Wales, response to Green Paper, 5
80. The Commission's explanatory memorandum to Proposal for a Directive concerning unfair business-to-consumer practices Directive June 2003, paras 10 and 22 points out that 47% of businesses claimed the need for compliance with different national requirements in each States is a huge barrier and that 55% of EU consumers have not heard or seen foreign advertising or information in the last 12 months
81. 81 Art 120.2
82. Rome I Proposal, supra n 7, Art 5(1). It might be a sign that with the development of the consumer protection tendency in th modern world, the trend in international consumer contracts might be for more restrictions on party autonomy
83. 83 The Law Society of England and Wales EU Committee, response to the Green Paper, 12
84. 84 European Consumer's Organisation (BEUC), response to the Green Paper, 9.,
85. Rome I proposal, supra n 7, memorandum 4.2
86. Green Paper, supra n 7, para 3.2.7.3, solution v; BEUC, supra n 84, 9; Nordic Group for Private International Law, response to Green Paper
87. Rome I proposal, supra n 7, Art 5(2): “It shall apply on condition that the contract has been concluded with a person who pursues a trade or profession in the Member State in which the consumer has his habitual residence or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities, unless the professional did not know where the consumer had his habitual residence and this ignorance was not attributable to his negligence.” For a similar approach, see Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation), Art 15(1)(c)
88. City of London Law Society Financial Law Sub-Committee, supra n 58
89. See Nygh, supra n 2, 155–56
90. City of London Law Society Financial Law Sub-Committee, supra n 58
91. Ibid, 18
92. Ibid. See also supra Section C.3(b)
93. 93 European Internet Services Providers Association, EuroISPA Position Paper (in response to the Green Paper), 3
94. EC Directive 93/13/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts, [1993] OJ L 095
95. Directive 97/55/EC concerning misleading advertising so as to include comparative advertising [1997] OJ L290; Directive 2000/13/EC on the labeling, presentation and the advertising of foodstuffs, [2000] OJ L109/29
96. Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees, [1999] OJ L171/12
97. Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers, [1998] OJ L80/27
98. Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L178/1
99. Directive 97/7/EC on the protection of consumers in respect of distance contracts, [1997] OJ L 144/19
100. Directive 99/93/EC on a Community framework for electronic signatures, [2000] OJ L 13/12
101. See Fawcett et al, supra n 9, para 21.10
102. 102 Art 5.1
103. Arts 7.1 and 7.2.,
104. Art 10.1(a).,
105. Art 10.1(b).,
106. Arts 10.1(c) and 11.2.,
107. Art 10.1(d).,
108. Art 10.2.,
109. Art 10.3.,
110. Art 11.1.,
111. As to the nature of the rules in the EU Directives, see generally, M Hellner, “The E-Commerce Directive and Private International Law”, in A, Schulz (ed), Legal Aspects of an E-Commerce Transaction–International Conference in the Hague 26 and 27 October 2004 (Munchen, European Law Publishers, 2006), 107
112. Green Paper, supra n 7, para 3.2.7.3. See EuroISPA, supra n 84, 3; Amazon Europe, supra 12, 2; European Mail Order and Distance Selling Trade Association (EOMTA), Comments on the Green Paper, 4, http://europa.eu.int/comm/justice_home/news/consulting_public/rome_i/doc/emota_en.pdf; Council of the Bars and Law Societies (CCBE) of the European Union, Response to the Green Paper, 7, http://europa.eu.int/comm/justice_home/news/consulting_public/rome_i/doc/council_bars_law_societies_en.pdf
113. Commission's explanatory memorandum to Proposal for a Directive concerning unfair business-to-consumer practices June 2003, para 30. See also Amazon, supra n 12, para 24
114. City of London Law Society Financial Law Sub-Committee, supra n 58, 13
115. Green Paper, para 3.2.7.3, option iv.; EuroISPA, supra n 93, 3; CCBE, supra 112, 7; Amazon Europe, supra 12, 2; EOMTA, supra n 112, 4
116. Directive 97/7/EC.,
117. 117 Art 14.,
118. Johann Wolfgang Goethe-Universität Frankfurt am Main, European Contract Law: Substantive and International—A Comment on the inherent interrelation of the Action Plan on European Contract Law COM(2003) 68 final and the Green Paper on the Modernisation of the 1980 Rome Convention COM(2002) 654 final, 3, http://europa.eu.int/comm/justice_home/news/consulting_public/rome_i/doc/universitat_frankfurt_en.pdf
119. 119 Art 5(1)
120. 120 Art 6(1).,
121. City of London Law Society Financial Law Sub-Committee, supra n 58, 14
122. 122 This approach would be suitable to settle disputes amongst the Member States of the European Union, and between the States of the USA, where the consumer protection rules in each State share great similarity
123. 123 Such as the preferential-law approach, and the exclusion-of-choice approach
124. 124 Such as the limited-choice approach and the unlimited-choice approach
125. Nordic Group for Private International Law, supra n 86, 36
126. 126 The same permission has been adopted by the Brussels I Regulation, Art 17(1)
127. A Briggs and P Rees, Civil Jurisdiction and Judgments (London, LLP, 4th edn, 2005), 97
128. Eg, E-commerce Directive, Art 5; Consumer Protection Act, CCSM, ch C200, s 129 (2005)(Can), Internet Pharmacy Consumer Protection Act (proposed), HR 3880, 108th Cong s 2(a)(2d Sess 2004) (US)
129. This protective scope uses the language in the Brussels I Regulation. For further interpretations of this condition, see J St Oren, “International Jurisdiction Over Consumer Contracts in E-Europe” (2003) 52 International and Comparative Law Quarterly 665
130. O'Hara, supra n 30, 1938
131. The complete harmonisation can also be difficult. For example, the Uniform Computer Infor mation Transactions Act (US) has been harshly criticised and the form of uniform law to all US states has been questioned. See generally, B Kobayashi and L Ribstein, “Uniformity, Choice of Law and Software Sales” (1999) 8 George Mason Law Review 261, 270–93