Application of laws of foreign related contract
2012-October-30 Source:
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The seller (a company in mainland China) and the buyer (a Hong Kong company) entered into a sales contract where the buyer purchased an auto from the seller at the price of 45,000 HK dollars and the auto shall be delivered within 15 days after the signing day. Due to the fluctuation of foreign exchange, the purchase price increased and the seller demanded another 1,000 to 2,000 HK dollars. After refused by the buyer, the seller delayed the delivery. The buyer, in need of auto, had no choice but rent a car. But the rental was also costly, so he purchased a same auto from another seller at 52,000 HK dollars. Later, the buyer terminated the sales contract and claimed compensation of the rental and the gap price. Dispute arose when the seller refused. Which law shall be applicable to the breach in this case?


According to Article 145 of Civil Law of PRC, unless otherwise stipulated by law, the parties to a contract involving foreign matter may choose the law applicable to the handling of disputes arising from the contract. If the parties have not made a choice, the law of the country of closest connection to the contract shall be applied. If the parties make a choice after the dispute has arisen, the chosen law shall be applied. Chinese laws, Hong Kong laws or other foreign laws can be chosen, and such choice is consensus and expressed. In international sales of goods, the law of the buyer’s business place should be applied if the contract is negotiated and entered into in the place of the buyer’s business is located, it is concluded on the buyer’s condition and tender offer, or it provides the seller shall perform its delivery in the buyer’s place. The application of law refers to the substantive law instead of the procedural law or rules of conflict. Therefore, the parties in this case have not made any choice, Contract Law of PRC should be applied due to it is closest connected to the contract.

(This information is provided by Lawyer Kelly Xie from Guangdong KaiTong Law Firm in friendship. It is not any legal opinion or legal grounds addressed to any organization or individual. For inquiry, please contact Kelly via email at or by phone on 13926185641.)

Editor: Olivia
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