23 Nov 2022

Modal Clause Legal Definition

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2. Contracting Parties may rely on the UNIDROIT Principles to interpret and supplement the applicable domestic law not only in the case of the domestic law of a country with a less developed legal system, but also in the case of a highly developed legal system. Even highly developed legal systems do not always provide a clear solution to specific issues arising from international trade agreements, so a solution must be found on a case-by-case basis. By referring to the UNIDROIT principles to interpret and supplement the applicable national law, the parties will achieve greater predictability in both cases, thus reducing transaction and litigation costs. The ICC Commission on Commercial Law and Practice (CLP) develops ICC Model Contracts and ICC Model Clauses that provide parties with a neutral framework for their contractual relationships. These contracts and clauses are carefully drafted by CLP experts, without expressing bias for any particular legal system. So which modal verb to use? In reality, this is unlikely to make a significant difference in your contract, assuming the intended consequence is clear. However, to avoid ending up in the minority of cases where your agreement is subject to scrutiny, “must” provides the safest and most definitive design means to capture your intended absolute commitment. 1. The UNIDROIT Principles of International Commercial Contracts (“the UNIDROIT Principles”), first published in 1994, with a second edition in 2004, a third in 2010 and now in their fourth edition (2016) (“the UNIDROIT Principles 2016”), constitute a non-binding codification or “reformulation” of the general part of international contract law. Hailed from their first appearance as an “important step towards the globalization of legal thinking”, they have been welcomed over the years not only by academics but also in practice, as evidenced by the numerous court decisions and arbitral awards around the world that refer in one way or another to the principles of UNIDROIT. (*) 3.

If the parties choose only the UNIDROIT principles as the legal standard for their contract, the question arises as to how to deal with matters which are not covered by the UNIDROIT principles. As comprehensive as the UNIDROIT Principles are, there are still issues that fall within their scope but are not explicitly addressed by them (e.g. specific cases of negotiations in bad faith (see Note 2 of Article 2.1.15 of the UNIDROIT Principles 2016); the scope of the obligation to cooperate (see commentary on Article 5.1.3 of the UNIDROIT Principles 2016); specific obligations to safeguard the rights of the other party until a condition is met (see Article 5.3.4 UNIDROIT Principles 2016); etc.). In addition, other issues fall outside the scope of the UNIDROIT Principles (e.g. lack of capacity (see Article 3.1.1 of the UNIDROIT Principles 2016); the internal relationship between the Client and the Agent (see Article 2.2.1(2) of the UNIDROIT Principles 2016); the authority of organs, directors or members of a company (see Article 2.2.1(3) of the UNIDROIT Principles 2016); etc.), as well as issues relating to certain types of contracts (e.g. in relation to contracts of sale, the buyer`s obligation to inspect the goods and notify them to the seller; special remedies for defects in the goods; transfer of risk; etc.). Issues which fall within the scope of the UNIDROIT Principles but are not explicitly regulated by them may, as far as possible, be settled in accordance with the fundamental ideas underlying the UNIDROIT Principles (see Article 1.6 of the UNIDROIT Principles 2016). On the other hand, matters which do not fall within the scope of the UNIDROIT principles and are therefore not covered by them at all are necessarily governed by other sources of law. If the contract does not contain a reference to the sources to be used (as in model clauses 1.2 and 1.3 below, pp. 9 et seq. and pp.

11 et seq.), these are determined in accordance with the relevant rules of private international law. Since these rules vary somewhat from one State to another and are not always predictable in their application, the absence of such a reference may lead to some uncertainty as to the source of the rules that apply to matters that fall outside the scope of the UNIDROIT principles. The UNIDROIT Principles can, and increasingly play, play an important role in interpreting and supplementing domestic law governed by contract or applicable to the subject-matter of the dispute (see UNIDROIT Principles 2016, Preamble, ยง 6). This is particularly the case when it comes to the domestic law of a country with a less developed legal system. However, even highly developed legal systems do not always provide a clear solution to specific issues arising from international trade agreements, either because opinions differ widely or because the problem at hand has not yet been addressed at all. In both cases, a clause referring to the UNIDROIT Principles may be used to ensure an interpretation and complement of the applicable national legislation in accordance with the internationally recognised principles and rules of the UNIDROIT Principles. ICC Model Contracts and Clauses aim to create a solid legal basis on which parties to international treaties can quickly reach a balanced agreement acceptable to both parties. (i) choose the UNIDROIT Principles without reference to other sources of law (see Model Clauses No. 1.1 (a) and (b), below, pp.

6 et seq. and p. 8) or 2.