Lao Contract and Tort Law (2008)

Presented by: Santisouk PhounesavathDirector of Multilateral Trade Division

Foreign Trade Policy DepartmentMinistry of Industry and Commerce, Lao PDR

“Celebrating the 35th Anniversary of CISG”, 23-24 April 2015, Singapore

Outline

1. Overview of Contract Law: Objectives & Best Practices2. Commercial Contract3. Commercial Contract, Foreign Parties and Arbitration4. Lao Contract and Tort Law (2008)

1. Overview of Contract Law: Objectives & Best Practices

Contract Formation:• Definition, withdrawal, revocation, rejection of an offer, mode and time of

acceptance, contract with terms deliberately left open, etc. Contract validity:

• Conditions for the validity of contracts

• What may hamper or annul them (definition of mistake, error in expression or transmission, remedies for non-performance, fraud, threat, gross disparity, etc.

Contract interpretation: • Conditions under which contracts may be interpreted, inter alia through assessment of the

intention of the parties

• Statements and other conduct, linguistic discrepancies, or omitted terms.

1. Overview of Contract Law: Objectives & Best Practices

Contract Content:• Content of a contract can also be delineated by contract law• E.g express and implied obligations, duty to achieve a specific result, duty of best efforts,

etc. Contract Performance Obligations:

• Conditions for performance of the obligations set forth (time, place, payments, currency used, imputation of non-monetary obligations, hardship.

• Conditions that allow non-performance .e.g. interference of another party, or to grant an additional period for performing the obligations of the contract.

Contract Termination: • Conditions for terminating a contract,

• Set principles for the termination and compensation of damages caused by the contractors, modalities for resolving disputes.

2. Commercial Contract

• A majority of Contracts laws are restricted to “commercial” contracts. This is in no way intended to take over the distinction traditionally made in some legal systems between “civil” and “commercial” parties and transactions, and to make the law dependent of whether the parties have the formal status of “merchants”, or the transaction is commercial in nature. • The idea is conversely to exclude from the scope of such laws the so-

called “consumer transactions”, which are within the various legal systems being increasingly subject to special rules, mostly of a mandatory character, aimed at protecting the consumer, a party who enters into the “transaction” otherwise than in the course of its trade or profession.

3. Commercial Contract, Foreign Parties and Arbitration

• When one or more parties to a “commercial contract” is a foreigner, or that the object of the contract is not only domestic, the parties should be allowed by the Contract law to freely choose and designate the national law that shall govern their contract, as far as this does not violate any public policy provisions (that supersede contractual clauses).

• If the parties agree to submit disputes arising from the implementation of their contract to arbitration, a contract may even stipulate the arbitrators are not necessarily bound by any particular domestic law, when they are authorized by the parties to act as amiable compositeurs or ex aequo et bono.

• But even in the absence of such an authorization parties are generally permitted to choose “rules of law” other than national laws on which the arbitrators are to base their decisions: see in particular the UNCITRAL Model Law on International Commercial Arbitration; see also the Convention on the Settlement of Investment Disputes between States and Nationals of other States [ICSID Convention].

4. Lao Contract and Tort Law (2008)Despite some good provisions, the Lao Contracts and Tort Law (2008) does not administer

most of the matter identified above. The following are some issues to consider for the Lao Contract Law of 2008:

• Ambiguous Scope - The Lao Contract Law of 2008 merges two previous laws (on contracts and tort), and is ambiguous as to its exact scope, especially as it combines contractual obligations, civil legal liability due to wrongful acts or infringement of a right provided under contract [a definition of tort], and liability for animals or objects either the property or under the custody of a person.

• Limited Areas for Contract - The 2008 Law also sets a limited list of areas that can lead to an agreement in the form of a contract, whereas there is usually no such list. It even more gives a narrow definition for any of these contracts, which may hinder the validity of a contract signed in the Lao PDR.

4. Lao Contract and Tort Law (2008)• Consumer Contractual Rights - The rights of consumers are not

specifically protected, since this Law addresses both commercial and civil contracts, while Article 21 in the “Consumer Protection law” adds more uncertainty when it stipulates “suppliers and consumers must conclude contracts in accordance with the law on contractual and non-contractual obligations”.

• Definitional Issues - The relevance of some of these provisions is questionable, such as the definition of “unilateral contracts”, and defining when commercial contracts are limited to “business operation”.

Next Step

• The Ministry of Justice is scheduled to draft the Contract and Commercial chapters in the Civil Code later this year, which could help to improve coverage of contract law in Lao PDR, based on best international practice. • Contract principles could be set forth in the code, and a new and

separate law on contracts that incorporate international best practice should be considered.