Foreign Currency: Claims, Judgments and Damages

Page 63




Monetary contractual claims

6.1 It is not surprising that the law of contract was the crucible in which the revolution wrought by Miliangos v George Frank (Textiles) Ltd 1 was forged. In the nature of things, it is cases that raise questions in this area of the law on which currency fluctuations are most likely to impinge. 6.2 Not all claims arising out of contracts are for monetary compensation. Some will be for specific performance of the contractual obligations, others for the prohibition of uncontractual behaviour.2 It is not even inevitable that contracts give rise to rights that are to be expressed in monetary terms. In cases such as barter or the mutual waiver of rights, there is no primary obligation on either party of a monetary nature. Nonetheless, the overwhelming majority of claims for breach or non-performance of contracts are for financial compensation, and the remainder are capable of being expressed as monetary claims. Monetary claims arising out of the breach or non-performance of contracts fall into three chief categories: (i) claims for debts, (ii) claims for other liquidated sums and (iii) claims for unliquidated damages. 6.3 In addition, a breach of contract may give rise to (iv) a claim for an account or (v) a claim for damages in lieu of an injunction or specific performance. 6.4 There are differences between the rules that determine the currency in which sums are awarded by judgments in each of the three principal types of claim for monetary compensation for a breach of contract. For all of them, though, there is a common task of identifying a relevant currency or currencies in which to express the claim. 6.5 There are three principal currencies with which an English court may be concerned, namely (i) the money of account, (ii) the money of payment and (iii) the currency in which damages for breach of contract are awarded. These concepts do not exist in the abstract. They are selected for the contract by reference to some system of law. Our principal concern is with English law, but many cases that

Page 64

are litigated in the English courts involve contracts that are governed by a foreign system of law, which must be applied in determining the substantive obligations of the parties in monetary terms.

The governing law 3

6.6 Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 governs the law applicable to contractual obligations. It is generally known as ‘Rome I’, and it is by that title that we refer to it. The Rome I Regulation applies to contracts concluded as from 17 December 2009 and replaces the EEC Convention on the Law Applicable to Contractual Obligations (‘the Rome Convention’) which was incorporated into the law of the United Kingdom by the Contracts (Applicable Law) Act 1990,4 and which applied to contracts made after 1 April 1991.

(a) The function of the governing law

6.7 The governing law is that system of law to which many questions arising from contracts are referred. It was formerly known as the proper law of the contract, but the term ‘governing law’ has become appropriate since the matter was made the subject of statute and European Regulation. Contracts made prior to 1 April 19915 are governed by the proper law as determined by common law rules of the English conflict of laws. From that date until 17 December 2009, the governing law was identified by the Rome Convention. For contracts made after 17 November 2009, the Act has been superseded by the provisions of Rome I.6 All three regimes have much in common, but there are significant differences between the common law, the Rome Convention and Rome I. The breadth of the operation of Rome I is indicated by Article 12(1) which sets out its sphere of operation as follows: The law applicable to a contract by virtue of this Regulation shall govern in particular:
  • (a) interpretation;
  • (b) performance;
  • (c) within the limits of the powers conferred on the court by its procedural law,, the consequences of a total or partial breach of obligations, including the assessment of damages so far as it is governed by rules of law;
  • (d) the various ways of extinguishing obligations and prescription and limitation of actions;
  • (e) the consequences of nullity of the contract.
6.8 In addition, Article 10 of the Regulation provides as follows:
  • 1. The existence and validity of a contract, or of any term of a contract, shall be determined

    Page 65

    by the law which would govern it under this Regulation if the contract or term were valid.
  • 2. Nevertheless, a party, in order to establish that he did not consent, may rely upon the law of the country in which he has his habitual residence if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law specified in paragraph 1.
6.9 Most of the questions that arise in relation to the currencies that are used to satisfy or defray contractual liabilities are regulated by the governing law, so that the identification of that law is a fundamental first step in any transaction with an international element. 6.10 Article 20 of the Regulation provides as follows:

Exclusion of renvoi

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.

Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited.

Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.