A NEGOTIATION-BASED CHOICE OF LAW RULE FOR CONTRACT FORMATION
Lew v Nargolwala
The formation of international contracts is one of those issues which earns the conflict of laws its reputation for convolution. Common law courts remain fixated on two choices of the applicable law for formation issues—the putative proper law1
or the lex fori
—despite those choices having long been criticised for perpetuating logical circularity and decisional disharmony respectively. The Singapore Court of Appeal’s decision in Solomon
Lew v Kaikhushru Shiavax Nargolwala
however, breaks the common law’s problematic duality on formation issues. Delivering the judgment of the court, Lord (Jonathan) Mance, sitting as an International Judge (“IJ”) on an appeal from the Singapore International Commercial Court, adopted a novel choice of law rule selecting the law most closely connected with parties’ pre-contractual negotiations. This note appraises Lord Mance IJ’s approach and argues that it has much to commend it, though it is in need of further refinement and may have far-reaching consequences for choice of law doctrine beyond contract issues.
Australian billionaire Solomon Lew wanted to purchase a villa in Thailand. Due to complications arising from Thai regulations, this had to be done by acquiring shares in an offshore company which owned the villa and had a lease of the underlying land.4
The villa was managed by one Daniel Meury, through whom Lew communicated his intention to the villa’s “owners”, Mr and Mrs Nargolwala, Singapore residents owning shares in the offshore company. Lew and the Nargolwalas negotiated using Meury as an intermediary; the parties never communicated directly. Subsequently, Meury informed Lew that the Nargolwalas had agreed to the sale. The Nargolwalas, however, thought no agreement had been concluded, and later agreed to sell the shares to other buyers. Believing himself gazumped, Lew sued the Nargolwalas in Singapore. They denied that any contract had been formed. The question then arose which law governed the formation issue: Lew argued for Singapore law; the Nargolwalas for Thai law.
At first instance, Simon Thorley IJ found that no contract existed. The appropriate choice of law rule was a three-stage rule to determine the governing law of the “putative contract”, with “express law”, “implied law” and “objective law” enquiries being made in that order.5
However, courts should stop at one of the three stages only if “a clear conclusion” was reached; “[i]n cases of doubt, the counsel of prudence would be to apply the lex fori
On the facts, an “implied law” could be deduced: the Nargolwalas had