Article

Solving the Riddle of Conflicting Choice of Law Clauses in Battle of

Forms Situations: The Hague Solution

KADNER GRAZIANO, Thomas

Reference
KADNER GRAZIANO, Thomas. Solving the Riddle of Conflicting Choice of Law Clauses in
Battle of Forms Situations: The Hague Solution. Yearbook of Private International Law,
2013, vol. 14, p. 71-101

Available at:
http://archive-ouverte.unige.ch/unige:44669

Disclaimer: layout of this document may differ from the published version.
 SOLVING THE RIDDLE OF CONFLICTING
CHOICE OF LAW CLAUSES IN BATTLE OF
FORMS SITUATIONS:
THE HAGUE SOLUTION
Thomas KADNER GRAZIANO*

"The battle of the forms that resulted.from

the exchange of standard/arm contracts has
gone on for over one hundred years. Yet
every attempt to end the battle has proven
only to inflame it. "1

I. Introduction
II. The Battle of Forms: A Short Survey of the Solutions under Different National
Legal Systems, the CISG, the UNIDROIT Principles, PECL and CESL
A. Last-Shot Rules
B. First-Shot Rules
C. Knock-Out Rules
D. Hybrid Solutions
III. The Battle of Forms in Private International Law: Diversity of Opinions and Much
Legal Uncertainty
A. Introduction
B. Proposals for a Solution
1. Applying the !ex fori
2. Knock-Out Rule at the PIL Level. Using Objective Connecting
Factors Instead
3. Use of the Law Applicable in the Absence of a Choice to Determine
the Prevailing Choice of Law Clause

• Professor of Law at the University of Geneva ([email protected]). Dr. iur.

(Goethe-Univ. Frankfurt), habit. (Humboldt-Univ. Berlin), LL.M. (Harv). The author is
member of the Swiss delegation to the Special Commission on Choice of Law in
International Contracts at the Hague Conference on Private International Law. He was in
charge of the Working Group on Art. 6 at the Commission's November 2012 meeting at The
Hague. The views expressed in this article are those of the author.
1
C.A. STEPHENS, Escape from the Battle of the Forms: Keep it Simple, Stupid,
[2007] Lewis & Clark L. Rev. 233. See also M.J. SHARIFF/ K. MARECHAL DE CARTERET,
Revisiting the Battle of the Forms: a Case Study Approach to Legal Strategy Development,
[2009] Asper Rev. lnt 'l Bus. & Trade L. 21: "The area of contract law described as the battle
of forms is a perfect example of an area of law where the legal rules and their application are
i:;omplex, contradictory, and/or inconsistently applied. Indeed, the battle of forms problem
has been recognized as among the most «difficult problems for contract doctrine to resolve»
and in some jurisdictions, has been described as «chaos» [ ... ]".

Yearbook of Private International Law, Volume 14 (201212013), pp. 71-101

© sellier european law publishers & Swiss Institute of Comparative Law
Printed in Germany
 Thomas Kadner Graziano

4. Analysing the Choice of Law under the Laws Chosen Respectively.

Solving Potential Conflicts by Way of a Knock-Out Rule
5. Comparing the Rules on the Battle of Forms under the Chosen Laws.
Knock-Out as Residual Rule
6. Combining the above Solutions No. 5 and No. 3
IV. The Hague Solution
A. Introduction
B. Case Scenarios
I. Scenario I: Choice of Law Clause in the Standard Forms of One
Party Only [Art. 6(1)(a) of the Hague Principles]
2. Scenario 2a: Both Designated Laws Apply Last-Shot Rules [Art.
6(l)(b) 1st alt. of the Hague Principles]
3. Scenario 2b: Both Designated Laws Apply First-Shot Rules [Art.
6( 1)(b) 1st alt. of the Hague Principles]
4. Scenario 3: One Designated Law Applies a First-Shot Rule, the
Other a Last-Shot Rule [Art. 6(1)(b) 2nct alt. of the Hague Principles]
5. Scenarios 4a and b: At Least One of the Desiguated Laws Applies a
Knock-Out Rule [Art. 6(1)(b) 3rd alt. of the Hague Principles]
C. Level of Precision of the Comparison under Art. 6(1) of the Hague
Principles
D. An Evaluation of the Hague Solution when Compared with Possible
Alternatives
I. Benefits of the Principles with Respect to their Competitors
2. Challenge: Determining the Solutions to the Battle of Forms
Situation under Foreign Laws - a Duty of the Parties to Co-operate?
V. Conflicting Choice of Law between Domestic Laws and the CISG
A. Introduction
B. Case Scenarios
I. Scenario 5: Choice of Law Clause in the Standard Forms of One
Party Only; the Designated Law is that of a Contracting State to the
CISG
2. Scenario 6: Exclusion of the CISG in the Standard Terms of one
Party
3. Scenario 7: One Party Designates in its Standard Terms the Law of a
Contracting State to the CISG, the Other the Law of a Non-
Contracting State
VI. Conclusions

I. Introduction
During contract formation parties frequently try at some stage of the negotiations
to include their own standard terms in the contract. When the contract is
transnational, these standard terms often contain choice oflaw clauses. 2 More often

2
According to L. Mrsrnus, "[m]ore than 80% of international contracts will
normally contain choice of law clauses", in S. KROLL/ L. MISTELIS/ P. PERALES VISCASILLAS

72 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

than not, the standard forms will designate different laws: for example, one party
having its place of business in Denmark provides for the application of Danish law
to the contract in his standard forms; the other party, established in New York,
respectively provides for the application of the law of New York. The question
then is: Which law governs the contract? And, first of all, which law is applicable
to the question of whether an agreement on the applicable law has been reached?
Given that both parties preferred choosing the applicable law rather than leaving its
determination to the application of objective connecting factors, should at least one
of the choice of law clauses be respected, and if so, which one? Which law applies
to decide the conflict of the choice oflaw clauses?
The issue of conflicting standard terms is widely discussed under the
succinct expression battle offorms. At the substantive law level, different contract
law systems give different answers to the question as to which party wins the
battle. The outcome of the battle of forms will thus depend on the applicable law.
The following contribution first provides a short overview of the solutions to battle
of forms situations in a number of national legal systems, the CISG, the
UNIDROIT Principles of International Commercial Contracts (UNIDROIT
Principles), the Principles of European Contract Law (PECL), and the European
Commission's Proposal of a Common European Sales Law (CESL) (II). In a
second step, the proposals to solve the battle of forms issue at the Private
International Law level, to be found in legal doctrine and national case-laws, will
be set out (III). In November 2012, the Hague Conference on Private International
Law proposed, in its Hague Principles on Choice of Law for International
Contracts, a solution to the problem of conflicting choice of law clauses in
standard terms in transnational situations.' The Hague solution will be presented,
then illustrated using a series of transnational case scenarios involving battle of
forms situations, and finally evaluated in comparison with the alternative solutions
suggested in legal doctrine (IV). The contribution then addresses the further
situation in which the conflicting choice of law is between domestic law regimes
and the CISG (V) before drawing conclusions (VI).

(eds.), UN Convention on Contracts for the International Sale of Goods (CISG), Miinchen
2011, Art. 6, para. 12.
3
Hague Principles on Choice of Law for International Contracts, Art. 6, available at
<www.hcch.net>.

Yearbook of Private International Law, Volume 14 (201212013) 73

 Thomas Kadner Graziano

II. The Battle of Forms: A Short Survey of the

Solutions under Different National Legal Systems,
the CISG, the UNIDROIT Principles, PECL and
CESL
In domestic laws, there are basically four4 fundamentally different solutions for
dealing with battle of forms situations.' In most countries, these solutions are
judge-made. Code provisions or other statutory rules on the battle of forms are still
rare, but examples are to be found in the Dutch Civil Code of 1992, the Polish
Civil Code, the recent codifications of two of the three Baltic States 6 as well as in
the Uniform Commercial Code (UCC). The UNIDROIT Principles, the PECL and
the CESL also provide for explicit rules on the battle of forms.

4
One could consider adding yet another solution according to which there is no
agreement and consequently no contract if the standard forms differ, see G. DANNEMANN,
The "Battle of Forms" and the Conflict of Laws, in F.R. ROSE (ed.), Lex Mercatoria: Essays
on International Commercial Law in Honour of Francis Reynolds, London 2000, p. 200 et
seq. with reference to a German case. However, once the parties have started executing the
contract, this solution seems to be no option anymore and recourse to the law of restitution
is in practice extremely rare in these situations, see also G. DANNEMANN, op. cit., at 201 and
fn. 6; E.A. FARNSWORTH, Contracts (4th ed.), New York 2004, para. 3.21: "Performance by
both parties makes it clear that there is a contract"; C. KEATING, Exploring the Battle of the
Forms in Action, [2000] 98 Mich. L. Rev. 2678, 2683: once both parties have started
executing the contract, "[ o]n the formation question, almost anyone would agree that there
was a valid contract at some time"; A.D.M. FORTE, The Battle of Forms, in
H.L. MACQUEEN/ R. ZIMMERMANN (eds), European Contract Law: Scots and South African
Perspectives, Edinburgh 2006, 98 at 102: "the risk that no contract may be found to exist [is]
a risk that a court faced with a dispute between two commercial parties might be reluctant to
run".
5
For comparative overviews, see L. M6LL, Kollidierende Rechtswahlklauseln in
Allgemeinen Geschaftsbedingungen im internationalen Vertragsrecht, Frankfurt 2012,
p. 87-152; E.A. KRAMER, "Battle of the Forms" Eine rechtsvergleichende Skizze mit Blick
auf das schweizerische Recht, in Gauchs Welt - Recht, Vertragsrecht und Baurecht,
Festschriftfiir Peter Gauch zum 65. Geburtstag, Zurich 2004, p. 493; G. RUHL, The Battle
of the Forms: Comparative and Economic Observations, [2003] 24 U Penn. J Int. Econ. L.
189; G. DANNEMANN (note 4), at 200-206; E.H. HONDIUS/ Ch. MAHE, The Battle of Forms:
Towards a Uniform Solution, [1998] 12 Journal of Contract Law 268; A. BOGGIANO,
International Standard Contracts - The Price of Fairness, Dordrecht 1991, p. 67-70; A.T.
VON MERREN, The Battle of the Forms: A Comparative View, [1990] Am. J Comp. L. 265;
E.J. JACOBS, The Battle of the Forms: Standard term contracts in comparative perspective,
[1985] 341.C.L.Q. 297.
6
See infra, II.C. No such explicit rules exist in the Civil Code of Latvia or the
Russian Civil Code of 1994.

74 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

A. Last-Shot Rules

In two leading cases, the English courts have solved battle of forms situations by
applying the rule of general contract law according to which offer and acceptance
must match (and the acceptance is required to be the "mirror image" of the offer).'
If a declaration purported to be an acceptance refers to standard terms differing
from those of the offer, it constitutes a new offer which is regarded as being
accepted at the latest when the party receiving it starts performing the contract. It is
thus, in principle, the last set of forms which prevails and which becomes part of
the contract (last-shot rule). 8 The last-shot rule can also be found in a leading
Scottish court decision. 9 Decisions in Australia have referred to the English
precedents when discussing battle of forms issues and in Australian legal doctrine
it is assumed that the courts might be willing to apply the last-shot rule. '0 It seems
that the courts in South Africa also tend to apply a last-shot rule to battle of forms
scenarios." The Chinese Contract Act 1999 arguably provides a last-shot rule. 12

7
British Road Services Ltdv. Arthur V Crutchley & Co. Ltd, [1968] l All ER 811,
(Court of Appeal, 5.12.1967); The Butler Machine Tool Company Ltd v. Ex-Cell-O Corp.
(England) Ltd, [1977] EWCA Civ 9 (Court of Appeal, 25.4.1977).
8
See e.g. G. TREITEL, The Law of Contracts (12'h ed.), London 2007, paras 2-019 et
seq.; E. PEEL, The Law of Contract (121h ed.), London 2007, paras 2-019 et seq.; see also
A.D.M. FORTE (note 4), at 100 et seq.; J. POOLE, Textbook on Contract Law (l01h ed.),
Oxford, 2010, p. 60 et seq.; Chitty on Contracts, Vol. I: General Principles (13 1h ed.),
London 2008, paras 2-034 et seq., and Chitty on Contracts, Third Cumulative Supplement,
London 2011, para. 2-037; with further references to more recent cases.
9
Uniroyal Ltd v. Miller & Co Ltd, 1985 SLT 101 (Outer House), according to
M. HOGG and G. LUBBE the "classic Scots authority" on battle of forms situations, in
R. ZIMMERMANN/ D. VISSER/ K. REID (eds), Mixed Legal Systems in Comparative
Perspective, Oxford 2004, p. 58, para. 159. See however A.D.M. FORTE (note 4), with
reference to a second Scottish case, Roofcare Ltd v. Gillies, 1984 SLT 8 (Sh Ct) (applying a
first-shot rule), and with the conclusion: "the best that can be said is that it is presently
unclear in Scots law which party's form, first or last, will win that battle", at 106 et seq.
' N.C. SEDDON/ M.P. ELLINGHAUS, Cheshire and Fifoot's Law of Contracts (8 1h
0

Australian ed.), LexisNexis Butterworths Australia, 2002, para. 3.28: "Australian courts will
probably follow the more traditional «matching» approach [i.e. require, like English courts,
«the precise matching of acceptance to offer»] which has the merit of ease of application";
see also J. GOOLEY/ P. RADAN, Principles of Australian Contract Law, LexisNexis
Butterworths Australia, 2006, paras 4.87 et seq., 4.89, 4.91 (leaving the answer open).
11
Ideal Fastener Corporation CC v. Book Vision (Pty) Ltd tla Coulour Graphic
2001 (3) SA 1028 (D), cited according to R. SHARROCK, Business Transactions Law (?1h
ed.), Cape Town 2007, p. 64. See however L.F. VAN HUYSSTEEN/ S.W.J. VAN DER MERWE/
C.J. MAXWELL, Contract Law in South Africa (2nd ed.), Alphen aan den Rijn 2012,
para. 147: "The practical problem that arises when parties accept that there is a contract
despite the absence of a final agreement as to incidental terms (e.g., in the so-called battle-
of-forms situation) has not received much attention in South African law"; in the same sense
A.D.M. FORTE (note 4), at 107: "The South African law of contract seems to have tended to
ignore the battle offo1ms debate"; M. HOGG/ G. LUBBE (note 9), at 58-59.
12
See its Art. 30 and 31 and BING LING, Contract Law in China, Hong Kong et al.
2002, para. 3.039.

Yearbook of Private International Law, Volume 14 (201212013) 75

 Thomas Kadner Graziano

Last but not least, Art. 19 of the CISG is understood as a last-shot rule in some
court decisions as well as by many commentators, notably, but not exclusively, in
Common Law jurisdictions. 13
If the standard terms that were last referred to contain different or additional
terms that do not materially alter the terms of the offer when compared to the
terms first employed, in a certain number of yet other contract law systems the
contract is also concluded with the modifications of the terms last referred to (i. e. a
last-shot rule is then applied). 14 However, in practice very few standard terms will
contain only non-material modifications when compared to the terms used by the
other party. In most, if not almost all situations the standard tenns will differ with
respect to substantial issues (such as, e.g., the law applicable to a transnational
contract). 15
Under last-shot rules, the forms that were last referred to prevail in total
over any other forms that were previously referred to. Previous references to other
standard terms are without effect and to be disregarded.

B. First-Shot Rules

According to another approach, it is in principle the first set of standard forms used
during the contract negotiations that will prevail. The main representative in
Europe for a first-shot rule is Art. 6:225(3) of the Dutch Civil Code. According to
this provision, if both the offer and the acceptance refer to different standard terms,
the second set of standard terms are to be disregarded except if the party submitting
the second set of terms expressly rejects the terms of the offer. According to the

13
See e.g. US District Court of Illinois 7.12.199, 99 C 5153, available at
<www.unilex.info/case.cfm?id=423>; OLG Linz 23.3.2005, CISG-online 1376.
E.A. FARNSWORTH (note 4), at para. 3.21; A.D.M. FORTE (note 4), at 115; F. FERRARI, in S.
KROLL/ L. MISTELIS/ P. PERALES VISCASILLAS (eds) (note 2), Art. 19, paras 15 et seq.;
L. MOLL (note 5), at 115 et seq. with numerous references in fu. 481, p. 123, and p. 184; for
numerous further references, see U. SCHROETER, in P. SCHLECHTRIEM/ I. SCHWENZER (eds),
Commentary on the UN Convention on the International Sale of Goods (CISG) (3'd ed., by
I. SCHWENZER), Oxford 2010, Art. 19, para. 35 and fu. 118-119.
14
Art. 2.1.11(2) UNlDROIT Principles, Art. 2:208(2) PECL, § 2-207(2)(b) UCC,
Art. 6:225(2) of the Dutch Civil Code, Art. 6: 178(2) of the Lithuanian Civil Code. See also
Art. 19(2) CISG, Art. 31 of the Chinese Contract Act. - Art. 39 of the CESL, on the other
hand, does not distinguish between terms materially altering the terms of the contract and
terms concerning issues of minor importance. The CESL thus avoids the difficult task of
drawing a line between the two categories of terms, which is certainly a good idea. For the
"vast amount of litigation [in the USA] devoted to determining whether particular terms
result in such «surprise or hardship» as to materially alter the contract", see E.A.
FARNSWORTH (note 4), at para. 3.21.
15
See for the CISG e.g.: W.A. STOFFEL, La formation du contrat, in The 1980
Vienna Convention on the International Sale of Goods, Lausanne Colloquium of November
19-20 1984, Zurich 1985, p. 73: "des conditions generales qui ne concement pas au moins
Un OU pJusieurs, Sinon tOUS Jes points, enumeres dans J'art. 19 aJ. 3 n'existent guere en
pratique"; E.A. FARNSWORTH (note 4), at para. 3.21; for the ucc e.g. C.A. STEPHENS (note
I), at 246; for Chinese law: BING LING (note 12), at para. 3.037.

76 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

dominant opinion in the Netherlands, the requirement in Art. 6:225(3) of the Dutch
Civil Code that the refusal be "express" excludes that it is made only in standard
terms. 16 Ideally, this rule shall lead to an explicit exchange between the parties as to
which standard terms will eventually prevail.
In the USA, under certain circumstances the UCC can also lead to the
integration of the first standard forms employed. 17
Under first-shot rules, the forms that were first referred to prevail in total
over the forms that were subsequently referred to. Later references to other
standard terms are in principle to be disregarded. Art. 6:225(3) of the Dutch Civil
Code, i.e. the main representative of this solution in European private law,
explicitly confirms this result by stating: "Where offer and acceptance refer to
different general conditions, the second reference is without effect [ ... ] ."

C. Knock-Out Rules

According to a third approach, conflicting standard terms knock each other out and
standard terms are to be disregarded when, and as far as, they contradict each
other. Knock-out rules are applied by the French Cour de cassation, 18 the German
Federal Court, 19 and the Supreme Court of Austria. 20 The largely dominant opinion
in Swiss legal doctrine also advances the proposal of a mutual knock-out of

16
See e.g. C.B.P. MAHE, in D. BUSCH et al. (eds), The Principles of European
Contract Law and Dutch Law: A Commentary, Nijmegen/ The Hague 2002, p. 123-124,
paras 2 and 3.
17
See§ 2-207(1) in conjunction with Sect. (2)(a), (b) or (c) of the UCC and under
the further condition that the acceptance is not "expressly made conditional on assent to the
additional or different terms", Sect. (1) in fine.
18
Cour de cass. (comm.) 20.11.1984 (Societe des constructions navales et
industrielles de la MMiterranee c. Societe Freudenberg), Bull. 1984 IV No. 313; see also
F. TERRE/ Ph. SIMLER/ Y. LEQUETTE, Droit civil, Les obligations (9'h ed.), Paris 2009, para.
122: "En cas de contradiction entre les clauses contenues dans les conditions generates de
chacune des parties - par exemple entre les conditions generales de vente et les conditions
generales d'achat - les deux stipulations s'annulent".
19
Bundesgerichtshof (BGH) 26.9.1973, BGHZ 61, 282, 286 et seq. = NJW 1973,
2106, 2107; Oberlandesgericht (OLG) Koln 19.3.1980, Betriebs-Berater 1980, 1237; BGH
20.3.1985, NJW 1985, 1838, 1839 et seq. (English translations of the 1980 and 1985
decisions in B. MARKES!NIS/ W. LORENZ/ G. DANNEMANN, The German Law of Obligations,
Vol. I: The Law of Contracts and Restitution, p. 61-63, case 13 and case 16); BGH
23.1.1991, NJW 1991, 1604, 1606; BGH 24.10.2000, NJW-RR 2001, 484; see also
J. BASEDOW, in Miinchener Kommentar zum Biirgerlichen Gesetzbuch, Band 2, Schuldrecht
- Allgemeiner Tei! - §§ 241-432 (61h ed.), Miinchen 2012, § 305, para. 105; J. BECKER, in
H.G. BAMBERGER/ H. Rorn (eds), Kommentar zum Biirgerlichen Gesetzbuch, Ed. 1 (3rd ed.),
Miinchen 2012, § 305, paras 81 et seq.; C. GRDNEBERG, in Palandt, Burgerliches
Gesetzbuch, Kommentar (71 ''ed.), Miinchen 2012, § 305, paras 54 et seq.
20
Oberster Gerichtshof (OGH) 7.6.1990, Juristische Blatter 1991, 120 = IPRax
1991, 419. See also P. RUMMEL (ed.), Kommentar zum Allgemeinen biirgerlichen
Gesetzbuch, 1. Band, Wien 2000, § 864a, para. 3.

Yearbook ofPrivate International Law, Volume 14 (201212013) 77

 Thomas Kadner Graziano

contradicting standard terms. 21 The new Estonian Code of Obligations22 as well as

the new Civil Code ofLithuania23 both explicitly adopt knock-out rules for battle of
forms scenarios, as well as, since the year 2000, the Polish Civil Code (for
contracts concluded between companies). 24 The UCC uses a knock-out rule as a
fall-back solution. 25 The UNIDROIT Principles of International Commercial
Contracts, the Principles of European Contract Law and the proposed Common
European Sales Law all solve battle of forms situations using knock-out rules. 26
Last but not least, many authors on the European continent, but also in other parts
of the world, suggest applying a knock-out rule under the CISG.27 The Draft

21
E.A. KRAMER, in E.A. KRAMER/ B. SCHMIDLIN (eds), Schweizerisches
Zivilgesetzbuch, Band VI, 1. Abteilung, 1. Teilband, Bern 1986, Art. 1, para. 160; idem (note
5), at 493 et seq.; A. KUT, in A. FURRER/ A.K. SCHNYDER (eds), Handkommentar zum
Schweizer Privatrecht, Obligationenrecht, Allgemeine Bestimmungen (2nd ed.), Zurich 2012,
Art. 1, para. 58; I. SCHWENZER, Schweizerisches Obligationenrecht, Allgemeiner Tei! (6 1h
ed.), Bern 2012, para. 45.15; Th. PROBST, in P. JUNG/ Ph. SPITZ (eds), Bundesgesetz gegen
den unlauteren Wettbewerb (UWG), Bern 2010, Art. 8, para. 9 et seq.; A. MORIN, in
Commentaire Romand, Code des obligations, Vol. I (2nd ed.), Bale 2012, Art. 1, para. 172;
distinguishing different scenarios: E. BUCHER, in Basler Kommentar, Obligationenrecht I,
Art. 1-529 (5 1h ed.), Basel 2011, Art. 1, paras 66-69.
22
§ 40 (Conflicting standard terms) of the Estonian Code of Obligations provides (in
English translation):"(!) If, upon entering into a contract, the parties each refer to their own
standard terms, the contract is deemed to have been entered into under the terms which are
not in conflict with each other. The provisions of law concerning the type of contract
concerned apply in lieu of any conflicting terms. (2) In the case of conflicting standard
terms, the contract is not deemed to have been entered into if one party has explicitly
indicated before the contract is entered into or without delay thereafter and not by way of the
standard terms that the party does not deem the contract to have been entered into. A party
does not have this right if the party has performed the contract in part or in full or has
accepted performance by the other party".
23
Art. 6.179 of the Civil Code of Lithuania (in English translation): "Conflict of
standard conditions. Where a contract is concluded by an exchange of standard conditions
between both parties, it shall be considered that the contract is concluded on the basis of the
standard conditions which are common in substance unless one party clearly indicates in
advance a disagreement with the standard conditions proposed by the other party, or informs
the other party without delay that it is opposed to the other party's standard conditions." On
this provision V. MIKELENAS et al., Lietuvos Respublikos civilinio kodekso komentaras. 6
knyga. Prievolitf teise. I dalis, Vilnius 2003 (V. MIKELENAS et al., The Commentary of the
Civil Code of the Republic Lithuania. Book 6. Law of Obligations. Part I, Vilnius),
Art. 6.179,paras 1-3.
24
§ 385 of the Polish Civil Code.
25
§ 2-207(3) of the UCC.
26
Art. 2.1.22 UNIDROIT Principles, Art. 2:209 PECL, Art. 39 CESL.
27
See e.g. u. SCHROETER, in P. SCHLECHTR!EM/ I. SCHWENZER (eds) (note 13),
Art. 19, para. 38 with numerous references in para. 36 and fn. 121-124; U. MAGNUS, Last
Shot vs. Knock Out ~ Still Battle over the Battle of Forms Under the CISG, in
R. CRANSTON/ J. RAMBERG/ J. ZIEGEL (eds), Commercial Law Challenges in the 2lst
Century. Jan Hellner in memoriam, Stockholm Centre for Commercial Law Juridiska
institutionen 2007, p. 200 (in fine); J. BECKER, in H.G. BAMBERGER/ H. ROTH (eds) (note 19),
§ 305, para. 83; W.A. STOFFEL (note 15), at 75; CISG Advisory Council Opinion Number

78 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

Chinese Civil Code also contains a knock-out rule 28 (instead of the last-shot rule in
Art. 30 and 31 of the Contract Act 1999 which is currently in force).
Under knock-out rules, the standard terms of neither party prevail. The
existing black letter rules establishing lmock-out rules thus provide that "the
contract is deemed to have been entered into under the terms which are not in
conflict with each other"29 or "that the contract is concluded on the basis of the
standard conditions which are common in substance" 30 or that "the contract may be
concluded according to the agreed clauses of contract and those standard-form
clauses with substantially similar content". 31 Under knock-out rules "[t]he general
conditions form part of the contract to the extent that they are common in
substance". 32

D. Hybrid Solutions

§ 2-207 of the UCC combines elements of first-shot, last-shot and knock-out rules,
the precise solution depending on the circumstances of the case. 33 In other
jurisdictions, the above-mentioned general rules may be displaced by different
solutions under certain circumstances. In Dutch law, for example, if a party
expressly rejects the application of the standard forms to which the first reference

13: Inclusion of Standard Terms under the CISG, Rule 10. - The question was left open by
the German Federal Court in BGH 9.1.2002, NJW2002, 1651, 1652.
28
Art. 867 (Conflict of standard clauses), see LIANG HUIXING, The Draft Civil Code
of the People's Republic of China, English Translation, Leiden/ Boston 2010.
29
§ 40(1) of the Code of Obligations of Estonia.
30
Art. 6.179 of the Lithuanian Civil Code, see also Art. 385 § 1 of the Polish Civil
Code.
31
Art. 867 of the Draft Civil Code of the People's Republic of China, see also Art.
2.1.22 of the UNIDROIT Principles.
32
Art. 2:209(1)2 PECL, Art. 39(1) CESL (emphasis added).
33
§ 2-207(1) abandons, in principle, the last-shot rule and "marked the end to the
common law's mirror image rule", see e.g. C. KEATING (note 4), at 2684. However, a last-
shot rule still applies if"acceptance is expressly made conditional on assent to the additional
or different terms", Sect. (1) in fine, and under the further conditions that the offer does not
"expressly limit acceptance to the terms of the offer", Sect. (2)(a), that the terms of the
acceptance do not "materially alter" those of the offer, Sect. (2)(b), or that no notification of
objection to the terms of the acceptance is given in due time, Sect. (2)(c). On the other hand
a first-shot rule applies under Sect. (1) in conjunction with Sect. (2)(a) if "the offer
expressly limits acceptance to the terms of the offer", or (b) the te1ms of the acceptance
"materially alter" those of the offer or (c) "notification of objection to them" is given, unless
the "acceptance is expressly made conditional on assent to the additional or different terms",
Sect. (1) in fine. Finally, a knock-out rule applies if the contract is not fonned under Sect. (1)
or (2) but conduct of both parties "recognizes the existence of a contract'', in particular if
they start executing the contract; see e.g. E.A. FARNSWORTH (note 4), at para. 3.21;
C.A. STEPHENS (note 1), at 237 (for the "Pre-Code-Situation"), 246, 250 (for the use of"the
old last-shot rule), and 251 (for the knock-out rule in Sect.(3) ). For§ 2-207 of the UCC in
practice, see C. KEATING (note 4).

Yearbook of Private International Law, Volume 14 (201212013) 79

 Thomas Kadner Graziano

was made and if the standard terms differ with respect to major points of the
contract, a knock-out rule will apply instead of the first-shot rule; if there is an
express refusal and if the alterations in the second set of standard terms are of
minor importance, a last-shot rule applies instead of the first-shot rule. 34
Under hybrid solutions, but also in some jurisdictions providing first-shot or
last-shot rules, the rule that eventually applies may thus very much depend on the
circumstances of the case. 35

HI. The Battle of Forms in Private International Law:

Diversity of Opinions and Much Legal Uncertainty
A. Introduction

If a transnational contract contains a choice of law clause, the first question is

whether the choice of law is permitted and whether it needs to meet special
requirements at the Private International Law level (for example that "[t]he choice
shall be made expressly or clearly demonstrated by the terms of the contract or the
circumstances of the case" 36 ). These questions are to be decided according to the
PIL of the forum.
The second question is whether the parties have actually agreed on the
applicable law. Nowadays, it is well established that an agreement on the
applicable law constitutes a second contract, to be analysed separately from the
main (for example construction or sales) contract. 37 The question then is: if the law

34
C.B.P. MAHE (note 16), at 123-124, paras 2 and 3.
35
Further complications may arise if one or both of the parties explicitly state in
their standard forms that they refuse to accept standard terms differing from their own terms
(so-called Abwehrklauseln, "rejection clauses"). Some contract law systems, such as the
PECL and the CESL regard such declarations as relevant only when made explicitly and not
by way of standard terms, Art. 2:209(2)(a) PECL, Art. 39(2)(a) CESL; see for German law
BGH 20.3.1985, NJW 1985, 1838, 1839 et seq. and BGH 23.1.1991, NJW 1991, 1604, 1606:
applying the knock-out rule if there are rejection clauses in standard terms. See for English
law e.g. E. PEEL (note 8), 2-021: "The most that the draftsmen can be certain of achieving is
the stalemate situation in which there is no contract at all. Such a situation will often be
inconvenient [ ... ]". - For a "Canadian battle of the forms case-law summary", see
M.J. SHARIFF/ K. MARECHAL DE CARTERET (note 1), at 30 et seq. It seems that the courts in
Canada are reluctant to follow any of the theories vigorously and are sceptical in particular
with regard to strict first- or last-shot rules.
36
See, e.g., Art. 3(1) 2 11d sent. of the Rome I Regulation; Art. 2 of the 1955 Hague
Convention; Art. 4(1) of the Hague Principles, etc.
37
See e.g. Art. 3(5) of the Rome I Regulation; R. FREITAG, in Th. RAUSCHER (ed.),
Europaisches Zivilprozess- und Kollisionsrecht -EuZPR/Eu!PR, Kommentar, Bearbeitung
2011: Rom I-VO, Rom II-VO, MUnchen 2011, Art. 3 Rom I-VO, para. 9; F. FERRARI, in
F. FERRARI/ E.-M. KlENINGERIP. MANKOWSKI/K. OTTE/ I. SAENGER/ R. SCHULZE/
A. STAUDINGER (eds), Internationales Vertragsrecht, Kommentar (2 11d ed.), Miinchen 2012,
Rom I-VO, Art. 10, para. 4; F. VISCHERI L. HUBER/ D. OSER, lnternationales Vertragsrecht

80 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

applicable to the main contract was purportedly designated during the contract
negotiations, which law applies to the question of whether an agreement on the
applicable law has actually been formed and whether this agreement is valid?
If, during the contract negotiations, only one law was purportedly
designated as the law applicable to the contract, it is recognized in international
choice of law instruments that "consent is to be determined by reference to the law
that would apply if such consent existed". 38 In other words the putatively chosen
law applies in order to determine whether the parties agreed on the applicable law
and whether the agreement is valid. 39 For example Art. 10(1) of the Rome I
Regulation (on "Consent and material validity") states that "[t]he existence and
validity of a contract, or of any term of a contract, shall be determined by the law
which would govern it under this Regulation if the contract or term were valid."
Art. 2(3) of the 1955 Hague Convention on the Law Applicable to International
Sales of Goods reads: "Les conditions, relatives au consentement des parties quant
ala loi declaree applicable, sont determinees par cette loi. "40 Similar rules are to be
found in national statutes on PIL. 41
The issue is much more complicated and controversial when the parties
designate in their respective standard forms not one but different laws to govern the
contract, which is frequently the case when both parties use standard terms in
transnational contracts. 42 If both parties to a transnational contract43 use standard

(2 11d ed.), Bern 2000, para. 139; J. KROPHOLLER, Internationales Privatrecht (6th ed.),
Tubingen 2006, § 52 II 2. For a critical view, see H. STOLL, Das Statut der
Rechtswahlvereinbarung - eine irrefiihrende Konstruktion, in Rechtskollisionen, Festschrifi
fur Anton Heini zum 65. Geburtstag, Zurich 1995, p. 429.
38
Compare: Hague Conference on Private International Law, Choice of Law in
International Contracts, Consolidated Version of Preparatory Work Leading to the Draft
Hague Principles on the Choice of Law in International Contract, Pre!. Doc. No 1, October
2012, para. 65.
39
Some authors call it a"bootstrap-rule", Benjamin's Sale of Goods (ih ed.), London
2006, para. 25-034; Chitty on Contracts (note 8), at para. 30-059.
40
The Convention was drawn up in French only. See also Art. 10 of the 1986 Hague
Convention on the Law Applicable to Contracts for the International Sale of Goods (not in
force): "(1) Issues concerning the existence and material validity of the consent of the
parties as to the choice of the applicable law are determined, where the choice satisfies the
requirements of Article 7, by the law chosen. If under that law the choice is invalid, the law
governing the contract is determined under Article 8."
41
See in particular Art. 116(2) of the Swiss Act on PIL: "L'election de droit [ ... ] est
regie par le droit choisi"; "Die Rechtswahl [ ... ] untersteht [ ... ] dem gewiihlten Recht''.
42
See e.g. the Austrian case OGH 7.6.1990, IPRax 1991, 419 (Austrian and German
choice of law clauses); the Gernrnn case Amtsgericht (AG) Kehl 6.10.1995, NJW-RR 1996,
565 (Italian and German choice of law clauses); or the English case O.T.M Ltd. v.
Hydranautics 2 Lloyd's Rep. 211 (Q.B. Com.: Parker, J.) cited according to G. DANNEMANN
(note 4), at 206.
43
For the question as to when a contract is to be regarded as "international", see e.g.
Art. 1(1) and (2) of the Hague Principles: "!. These Principles apply to choice of law in
international contracts [ ... ]''. 2. For the purposes of these Principles, a contract is
international unless the parties have their establishments in the same State and the

Yearbook of Private International Law, Volume 14 (201212013) 81

 Thomas Kadner Graziano

forms, and if these standard terms designate different laws to govern the contract,
which law then applies to decide the battle of forms and, consequently, which law
applies to the choice of law agreement and - if this agreement is valid - to the
main contract? 44
This issue has so far never been explicitly addressed in a black letter rule,
neither in the Rome I Regulation45 nor the 1955 Hague Sales Conventions nor the
1986 Hague Convention on the Law applicable to Contracts for the International
Sale of Goods,4 6 nor in any national PIL statute. Given the complexity of the issue,
the courts have so far often tried to avoid or circumvent the issue of the law
applicable to the choice of law agreement or they simply applied the !ex fori.

B. Proposals for a Solution

1. Applying the lex fori

A first solution could be found in solving the battle of conflicting choice of law
clauses in standard forms according to the lex fori. This approach was eventually
applied by some courts confronted with complex issues of choice of law in
diverging standard forms, 47 and it has also been suggested by a minority opinion in
the UK and Switzerland.48
In order to support this solution, it has been argued that both parties
preferred to choose the applicable law rather than have it determined through

relationship of the parties and all other relevant elements, regardless of the chosen law, are
connected only with that State".
44
See on this issue: G. DANNEMANN (note 4), at 206 et seq.; A. DUTTA, Kollidierende
Rechtswahlklauseln in Allgemeinen Geschaftsbedingungen, ZVg!RWiss 2005, 461; L. MOLL
(note 5), at 153 et seq., 188 et seq.; S. MAIRE, Die Quelle der Parteiautonomie und das
Statut der Rechtswahlvereinbarung im internationalen Vertragsrecht, Basel 2011, p. 151
et seq. For an overview of the case-law, see e.g. L. MOLL (note 5), at 201 et seq.
45
Dicey, Morris and Collins on the Conflict of Laws, Vol. 2 (15th ed.), London 2012,
para. 32-165: "if both sets of standard terms contain choice of law clauses, but choose
different laws, then the Rome [Regulation] provides no solution".
46
The 1986 Hague Convention is not yet in force.
47
However, the lex fori was often applied without stating this explicitly, for
references see L. MOLL (note 5), at 203 and n. 777; see also the court decisions presented by
M.J. SHARIFF/ K. MARECHALDE CARTERET (note 1).
48
J. FAWCETT/ J. HARRIS/ M. BRIDGE, International Sale of Goods in the Conflict of
Laws, Oxford 2005, paras 13.60-13.6lwith references; the application of the lexfori is also
considered in Dicey, Morris and Collins on the Conflict of Laws (note 45), at para. 32-103:
"In these circumstances the only laws which could provide an answer are the !ex fori or the
law which would govern the contract in the absence of an express choice of law", see also
para. 32-165; ibid, at para. 32-164: "English and Australian courts have tended to apply the
!ex fori to determine what the terms of the contract were"; M. KELLER/ J. KREN
KosTKIEwICZ, in Ziircher Kommentar zum IPRG (2°d ed.), Zurich 2004, Art. 116, para. 43;
see also the references in A. DUTTA (note 44), at 464.

82 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

objective connecting factors. Instead of ignoring the choices altogether,4 9 the law of
the forum may play "a residual and mediating role". 50
Applying the !ex fori is however an "imperfect solution" even in the eyes of
its proponents, "and reliance on the law of the forum raises an obvious forum
shopping objection" 51 (in the same case, depending on the forum chosen by the
claimant, English courts would, for example, apply a last-shot rule, whereas
French, German or Swiss courts, for example, a knock-out rule.) The forum is
often chosen for procedural reasons and there is not necessarily a link between the
contract and the !ex fori. 52 What is more, since the !ex fori is unlmown when the
contract is formed, this approach results in considerable uncertainty until a case is
eventually brought before the courts. 53 Last but not least, modem PIL instruments
very much suppress the role of the forum in determining the consent to a choice of
law, and rightly so. For example, under Art. 3(5) and 10(1) of the Rome I
Regulation "invoking the lexfori is no longer an option''. 54

2. Knock-Out Rule at the PIL Level. Using Objective Connecting Factors

Instead

According to a second opinion dominant in English legal doctrine and, in the past,
also in Germany, if the parties use conflicting choice of law clauses in their
standard terms the choice will be ineffective and the applicable law be determined
according to objective connecting factors. 55
In support of this solution, it has been argued that there is no agreement on
the applicable law, and not even the appearance of an agreement, if both parties

49
See the second proposal, infra 2.
50
J. FAWCETT/ J. HARRIS/M. BRIDGE (note 48), at para. 13.61 (p. 675).
51
J. FAWCETT/I. HARRIS/ M. BRIDGE (note 48), at para. 13.61 (p. 675).
52
S. MAIRE (note 44), at 155.
53
D. MARTINY, in Miinchener Kommentar zum Biirgerlichen Gesetzbuch, Band 10,
IPR (5 1h ed.), Mi.inchen 2010, Art. 3 Rom I-VO, para. 106; M. AMSTUTZ/ N.P. VOGT/
M. WANG, in Basler Kommentar, Internationales Privatrecht (2°d ed.), Basel 2007, Art. 116,
para. 47; R. HAUSMANN, in J v. Staudingers Kommentar zum Biirgerlichen Gesetzbuch,
EGBGB/IPR, Berlin 2011, Art. 10 Rom I-VO, paras 35-36.
54
G. DANNEMANN (note 4), at 210; see also A. DUTTA, (note 44), at 464; L. MOLL
(note 5), at 207; D. MARTINY, in Miinchener Kommentar, Band JO (note 53), Art. 3 Rom I-
YO, para. 13.
55
L. COLLINS (gen. ed.), Dicey, Morris and Collins on the Conflict of Laws (note
45), at para. 32-103; C.M.V. CLARKSON/ J. HILL, The Conflict of Laws (3'd ed.), Oxford
2006, p. 184; Benjamin's Sale of Good~ (note 39), at para. 25-034 in fine; less determined:
Chitty on Contracts (note 8), at para. 30-059: the above solution "has been suggested";
J. VON HEIN, in Th. RAUSCHER (ed.) (note 37), Art. 3 Rom I-VO, para. 43; R. HAUSMANN
(note 53), Art. 10 Rom I-VO, para. 36; Ch. VON BAR, Internationales Privatrecht, Zweiter
Band, Mi.inchen 1991, para 475. - See also the German case AG Kehl 6.10.1995, NJW-RR
1996, 565 = CISG-online 162.

Yearbook of Private International Law, Volume 14 (201212013) 83

 Thomas Kadner Graziano

want to have different laws applied. This solution also has the advantage of being
simple, clear and its results are easily foreseeable for the parties. 56
However, if one party designates the law of A to govern the contract and the
other the law of B, "rejecting both choices may defeat the expectation of both
parties, and any third parties relying upon the contract. In other words, the fact that
both parties cannot have their preferences respected is not obviously a sound
reason for saying that we should respect neither." 57

3. Use of the Law Applicable in the Absence of a Choice to Determine the

Prevailing Choice of Law Clause

According to a third approach, the battle of forms shall be decided under the law
that would be applicable in the absence of choice. This law then decides whether
any standard forms prevail, or whether the conflicting choice-of-law clauses knock
each other out. If one set of standard forms prevails, the law chosen in these terms
shall then apply to the choice-of-law agreement 58 (and - if the choice is valid under
this law- eventually also to the main contract).
This approach has been criticized for splitting the applicable law between a
first law applicable to the battle of forms in general (first step) and a second law,
determined in the first step, and then applicable to analysing the existence of an
agreement on the applicable law (second step ); 59 the battle of forms is then decided
(in the first step) by a law that may eventually not be applicable since, in the end, a
choice of the applicable law may be accepted and this law applied (in the second
step ). 60

4. Analysing the Choice of Law under the Laws Chosen Respectively.

Solving Potential Conflicts by Way of a Knock-Out Rule

Following a fourth opinion, the inclusion of each respective set of standard terms
(including the choice of law clause) shall be analysed separately under the law
designated in those terms. If neither of the terms passes this test, objective
connecting factors apply. If one of the terms passes it, the law chosen in these

56
See also L. MOLL (note 5), at 207.
57
J. FAWCETT/ J. HARRIS/ M. BRIDGE (note 48), at para. 13.61 (p. 675); for further
arguments against this approach, see A. DUTTA (note 44), at 465 et seq.
58
0. LANDO, Int. Enc. Comp. L., Vol. III: Private International Law, Ch. 24:
Contracts, Sect. 84; W.-H. ROTH, Internationales Versicherungsvertragsrecht, Ti.ibingen
1985, p. 578; following a comprehensive analysis, this solution has recently again been
suggested by L. MOLL (note 5), at 219 et seq., 232 et seq. with a well-argued proposal. This
approach is also partially used under the solution suggested by A. DUTTA (note 44).
59
M. AMSTUTZ/ N.P. VOGT/ M. WANG, in Basler Kommentar IPR (note 53),
Art. 116, para. 47.
60
D. MARTINY, in Miinchener Kommentar, Band 10 (note 53), Art. 3 Rom I-VO,
para. 106; R. HAUSMANN (note 53), Art. 10 Rom I-VO, para. 36.

84 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

terms shall apply to the choice of law agreement. Should, on the other hand, both
designated laws reach the conclusion that the respective terms were included in the
contract (and the respective laws validly chosen), the choice of law clauses will
knock each other out, or the conflict could be solved by taking inspiration from the
rule governing the battle of forms under the !ex fori, in particular if it applies a
knock-out rule; in this case, objective connecting factors should then be applied.' 1
This approach is complicated and its results may be fortuitous. 62 It has also
been said that it favours parties referring to jurisdictions using a first- or last-shot
approach (as opposed to parties designating a law using a knock-out rule). 63 When
some of the proponents of this approach suggest having recourse to the lexfori, all
the above mentioned arguments against applying the !ex fori' 4 apply here as well. It
has further been argued, and rightly so, that this approach tends to ignore that
either there is a choice of law agreement or there isn't; to apply two laws in parallel
in order to determine whether there is consent would lead to the existence (or the
non-existence) of two rather than one contract on the applicable law. 65 Last but not
least it is hardly convincing that the choice of law in one of the standard terms
should be respected if the other standard terms do not form part of the contract
under the law they designate, whereas recourse to objective connecting factors
should be made if under both of the designated laws the standard terms (and the
choice oflaw clauses they contain) are validly integrated into the contract. 66

5. Comparing the Rules on the Battle of Forms under the Chosen Laws.
Knock-Out as Residual Rule

According to a fifth proposal, regard should be had to the solutions to battle of

forms situations under the laws designated in the standard forms of both parties. 67
The situation is uncomplicated, according to this proposal, if both designated laws
provide the same solution to the battle of forms. If under both laws, conflicting
standard terms knock each other out, the choice of law clauses would annul each
other and the applicable law would be determined by objective connecting factors.

61
G. DANNEMANN (note 4), at 210; D. LOOSCHELDERS, Internationales Privatrecht -
Art. 3-46 EGBGB, Heidelberg 2004, Art. 27, para. 31; S. EGELER, Konsensprobleme im
internationalen Schuldvertragsrecht, St. Gallen 1994, p. 202 et seq.; 0. SIEG, Allgemeine
Geschaftsbedingungen im grenztiberschreitenden Rechtsverkehr, RIW 1997, 811, 817;
S. TIEDEMANN, Kollidierende AGB-Rechtswahlklauseln im osterreichischen und deutschen
IPR, IPRax 1991, 424, 425 et seq.; W. MEYER-SPARENBERG, Rechtswahlvereinbarungen in
Allgemeinen Geschiiftsbedingungen, RIW 1989, 347, 348.
62
S. MAIRE (note 44), at 155.
63
A. DUTTA (note 44), at 471, 478.
64
Supra, 1.
65
F. VISCHERI L. HUBER/ D. OSER (note 37), at para. 156; A. DUTTA (note 44), at
470; S. MAIRE (note 44), at 155; L. MOLL (note 5), at 214 et seq.
66
A. DUTTA (note 44), at 470.
67
A. BONOMI, in Commentaire Romand - Loi sur le droit international prive,
Convention de Lugano, Bale 2011, Art. 116, para. 49.

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 Thomas Kadner Graziano

If on the contrary both designated laws applied last-shot rules, the choice of law
clause in the standard terms of the party who fired the last shot should prevail. The
situation is more complicated if both laws designate different rules when it comes
to dealing with the battle of forms. The only solution to this situation would be a
mutual knocking out of the contradictory choice of law clauses. 68 In the case of a
lmock-out of the choice of law clauses, the applicable law is to be determined by
objective connecting factors. When looking for support for this recourse to a
knock-out rule as a residual rule, reference to the UNIDROIT Principles and the
PECL is made, both of them providing knock-out rules (though at a substantive
law level). 69
This approach achieves very reasonable results in all kinds of battle of
forms situations without giving preference to any of the parties or any of the laws
designated. If this rule is phrased as a specific PIL rule, it is possible to avoid any
recourse to the !ex fori. - When it comes to actually applying this approach, the
challenge lies in determining the precise solutions that foreign laws provide for the
battle of forms situation for the case under examination.

6. Combining the above Solutions No. 5 and No. 3

A sixth approach combines the above solutions No. 5 and No. 3: If both designated
laws use a last-shot rule, the choice of law clause in the standard forms introduced
last shall prevail. If both laws use knock-out rules, the choice oflaw clauses knock
each other out. 70 So far, the approach is similar to the one presented supra, 5.
If both laws designate different rules for dealing with the battle of forms,
the law that decides the battle of forms shall, according to this approach, be
determined through objective connecting factors, i.e. according to the rules
applicable in the absence of a choice (first step). The law thereby determined shall
then decide the battle (second step). If this law uses a last-shot rule, the law
designated in the last shot shall prevail. If it uses a knock-out rule, there is no
choice of law and objective connecting factors apply instead (compare the solution
supra, 3.). 71
To give an example: A German company submits a request for services to a
service provider established in England. Both parties use standard terms
designating the law of their respective jurisdictions to govern the contract. The
English party fires the last shot. English law uses a last-shot, German law a knock-
out rule. Both laws thus designate different rules when it comes to dealing with the
battle of forms. At this stage it is suggested to use objective connecting factors
(instead of the knock-out rule which is suggested under the approach presented
supra, 5.). Under many PIL systems (such as, e.g. Art. 4(l)(b) of the Rome I
Regulation), this would lead to the application of the law of the service provider, in

68
A. BONOMI (note 67), Art. 116, para. 49. This solution coincides with the solution
at the substantive law level in the jurisdiction for which Bonomi made this proposal.
69
A. BONOMI (note 67), Art. 116, para. 49.
70
A. DUTTA (note 44), at 475.
71
A. DUTTA (note 44), at 476 et seq.

86 Yearbook of Private International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

the example: English law. Under English law a last-shot rule applies and the
service provider's standard terms prevail. The choice of law agreement would thus
be governed by English law.
This solution achieves very reasonable results indeed. 72 It is, however,
complex to the extent that not every judge, not being paiiicularly trained in private
international law, might be capable, and willing, to follow its complexity, 73 let
alone parties who are not trained in law at all. A black letter rule trying to adopt
this approach would necessarily have to be complex.

IV. The Hague Solution

A. Introduction

The above analysis shows the high degree of uncertainty that currently exists when
the parties designate different laws in their standard terms. Court decisions on this
issue are rare and the doctrine is divided. When comparing laws it is a frequent
experience to discover three, sometimes four fundamentally different solutions for
solving a precise legal problem. With regard to the battle of form in PIL, six 74
different solutions, some of considerable complexity, could be identified. For
parties to international contracts in this situation, it is highly unpredictable which
law will ultimately govern their contract.
In November 2012, a Special Commission of the Hague Conference of
Private International Law approved the Hague Principles on Choice of Law for
International Contracts (in the following: "the Hague Principles"). 75 One of the
main aims of this instrument is to promote party autonomy and legal certainty with
respect to the law governing transnational contracts. Given the uncertainty in battle
of forms situations, the Special Commission decided in its November 2012

72
U. SPELLENBERG, in Munchener Kommentar, Band JO (note 53), Art. 10 Rom I-
YO, para. 169; see also the overall positive evaluation by S. MAIRE (note 44), at 157.
73
S. MAIRE (note 44), at 157: "sehr kompliziert".
74
In legal doctrine, even more proposals can be found: (7.) A. BOGGIANO,
International Standard Contracts - A comparative study, Recueil des Cours 170 (1981), 9,
41: analogous application of Art. 19 of the CISG, interpreted as a knock-out rule. (8.)
D. UNGNADE, Die Geltung von Allgemeinen Geschaftsbedingungen der Kreditinstitute im
Verkehr mit dem Ausland, Wertpapier-Mitteilungen 1973, 1130, 1132: preference to the
choice of law clause of the party required to effect the characteristic performance of the
contract. For arguments against these proposals see L. MOLL (note 5), at 208-210.
75
www.hcch.net. The final text of the Hague Principles and the official commentary
are yet to be accepted by the Council. The approval is expected for April 2014. See on the
Hague Principles 0. LANDO, The Draft Hague Principles on the Choice of Law in
International Contracts and Rome I, in Festschrift Hans van Loon, p. 305-316
(forthcoming); S. SYMEONIDES, The Hague Principles on Choice of Law for International
Contracts: Some Preliminary Comments, Am. J Comp. L. (forthcoming), French language
version in Rev. crit. dr. int. pr. (forthcoming).

Yearbook of Private International Law, Volume 14 (201212013) 87

 Thomas Kadner Graziano

meeting to include this issue in its considerations and to introduce a specific

provision addressing this problem. It states:
"Article 6-Agreement on the Choice of Law and Battle of Forms
1. Subject to paragraph 2,
a) whether the parties have agreed to a choice of law is determined
by the law that was purportedly agreed to;
b) if the parties have used standard terms designating different laws
and under both of these laws the same standard terms prevail, the
law designated in the prevailing terms applies; if under these laws
different standard terms prevail, or if under one or both of these laws
no standard terms prevail, there is no choice of law.
2. The law of the State in which a party has its establishment
determines whether that party has consented to the choice of law if,
under the circumstances, it would not be reasonable to make that
determination under the law specified in paragraph l."
Art. 6(1 )(b) of the Hague Principles addresses, for the first time in black letter
rules, the issue of the law applicable to choice of law in battle of forms situations.
When deliberating the provision that eventually became Art. 6 of the Hague
Principles, the Special Commission used a series of case scenarios. The following
chapter adopts the same approach using scenarios in order to illustrate the
functioning of Art. 6 of the Hague Principles.

B. Case Scenarios

1. Scenario 1: Choice of Law Clause in the Standard Forms of One Party

Only [Art. 6(1)(a) of the Hague Principles]

Scenario 1: One of the parties to an international service contract7 6

designates the law of the Canadian Province Quebec as the law applicable to
the contract in its standard forms. The other party's standard terms do not
provide a choice oflaw clause.
The starting point for the analysis of the first scenario is Art. 6( 1)(a) of the Hague
Principles: If the law applicable to the contract was designated during the
negotiations, the question of whether a valid agreement on the applicable law was
is "determined by the law that was purportedly agreed to". "Once the consent is
confirmed by that law, all issues relating to the remainder of the main contract are
then assessed under the chosen law as the lex causae, not as the putatively
applicable law." 77 The Principles do not establish a formal requirement as to the

76
For international sales contracts with respect to which the CISG enters into
consideration, see infra, V.
77
Hague Conference on Private International Law (note 38), Pre!. Doc. No 1 of
October 2012, para. 65.

88 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

choice of the applicable law. 78 The choice can very well be made in standard forms,
just as in scenario 1. 79
This first case thus falls within the scope of application of Art. 6( 1)(a) of the
Hague Principles. Given that only one law was designated during the contract
negotiations, this law purportedly agreed to determines whether there was an
actual agreement on the choice of law clause. The special provision on battle of
forms in lit. (b) of Art. 6(1) of the Hague Principles does not apply since it is
limited to situations in which both "parties have used standard terms designating
different laws". In the first scenario, "whether the parties have agreed to a choice
oflaw is [thus] determined by the law that was purportedly agreed to", Art. 6(l)(a),
i.e. the law of Quebec.

2. Scenario 2a: Both Designated Laws Apply Last-Shot Rules [Art. 6(1)(b)
1'1 alt. of the Hague Principles]
Scenario 2a: A makes an offer designating in its standard terms a Common
Law jurisdiction (other than English law) containing a last-shot rule; 80 B
declares acceptance providing in its standard terms the application of
English law. B fires the last shot.

In legal doctrine it has been argued that in a scenario such as case 2a, there is no
consensus on the applicable law. The choice of law clauses in both parties'
standard terms should thus be disregarded and the law governing the contract were
to be determined by way of objective connecting factors. 81
The Hague Principles choose a different approach to deal with this situation.
In its November 2012 Meeting, the Special Commission assumed that in
transnational contracts, choice of law (and choice of jurisdiction) clauses are

78
Supra (note 38) Pre!. Doc. No 1, October 2012, para. 65.
79
See for the similar approach under the Rome I Regulation: Dicey, Morris and
Collins on the Conflict of Laws (note 45), at para. 32-165: "If one only of the sets of terms
contains a choice of law provision, then the law purportedly chosen will be the putative
applicable law"; F. FERRARI in Internationales Vertragsrecht (note 37) Rom I-VO, Art. 3,
para. 24: "auch die in Formularen oder allgemeinen Geschaftsbedingungen erfolgte
Bestimmung des anwendbaren Rechts stellt eine ausdruckliche Rechtswahl dar, und dies
selbst dann, wenn die allgemeinen Geschaftsbedingungen ihrerseits stillschweigend
vereinbart worden sind" (with numerous further references); R. HAUSMANN (note 53),
Art. 10 Rom I-VO, para. 36; for Switzerland M. AMSTUTZ/N.P. VOGT/ M. WANG, in Basler
Kommentar IPR (note 53), Art. 116, para. 47: "Richtiger Auffassung nach ist [ ... ]die Frage
der Rechtswahlubemahme nach dem in den AGB gewahlten Recht zu beurteilen." -
CONTRA: Against the application of "bootstrap-rules" in situations where the applicable
law was designated in the standard terms of only one party: Benjamin's Sale of Goods (note
39), at para. 25-034 (for Rome I): "In such circumstances, it does not seem possible to
conclude that a choice of law has been expressed or demonstrated with reasonable certainty
for the purposes of Article 3(1) of the Convention"; Chitty on Contracts (note 8), at
para. 30-059.
80
See supra, II.A.
81
References supra, IIl.B.2.

Yearbook of Private International Law, Volume 14 (201212013) 89

 Thomas Kadner Graziano

frequently included in standard terms. The Commission further assumed that most
parties prefer to have their own law applied and thus have a tendency to choose
their own law in their standard terms. There is much evidence today to support
these assumptions which were also confirmed by representatives of the
international lawyers' associations present at the Hague meeting. If this is so, the
potential for conflicting choice of law clauses in standard terms is enormous. 82 If in
these situations the choice of law in the parties' standard terms were always
deprived of their effect, the scope of application for a choice of the applicable law
by the parties would be considerably reduced, even though - in situations such as
scenario 2a - both parties prefer a choice of the applicable law rather than having
the applicable law determined through objective connecting factors.
Given the high degree of uncertainty that currently reigns in battle of forms
scenarios, the Special Commission decided to explicitly address such situations
and to adopt a solution that respects party autonomy as much as possible, while, at
the same time, avoiding needless complexities. According to Art. 6(1 )(b) 1st alt. of
the Hague Principles "if the parties have used standard terms designating different
laws and under both of these laws the same standard terms prevail, the law
designated in the prevailing terms applies". This is exactly the situation in scenario
2a: Both parties have designated jurisdictions applying last-shot rules to the battle
of forms. Under both laws, the standard forms that were submitted last prevail, i.e.
B 's standard terms designating English law. Pursuant to Art. 6(1 )(b) 1st alt. of the
Hague Principles, this result is respected and English contract law applies.
Since both laws designated by the parties solve the battle of forms in favour
of the forms submitted by the same party (in the above scenario: B), the apparent
conflict is in fact a false conflict. The choice of law clause in B 's standard forms is
thus respected and no recourse to objective connecting factors is needed.

3. Scenario 2b: Both Designated Laws Apply First-Shot Rules [Art. 6(1)(b)
1'1 alt. of the Hague Principles]

Scenario 2b: A makes an offer designating in its standard terms Dutch law
as the law governing the contract. B responds declaring acceptance but
providing in its standard forms the application of another law applying a
first-shot rule to the same scenario.
Given that from a comparative perspective first-shot rules are much rarer than last-
shot or knock-out rules, 83 scenario 2b will much less frequently appear in practice
than any other scenario. The approach of the Hague Principles to this situation is
basically the same as in scenario 2a: Once again "the parties have used standard
terms designating different laws [Dutch law and another law applying a first-shot

82
This does not necessarily mean that these conflicts are frequently resolved in
litigation before courts. For reasons not to go to courts in battle of forms situations, and
arguably in contract cases in general, see C. KEATING (note 4); see also G.G. MURRAY,
A Corporate Council's Perspective of the "Battle of Forms", [1979-1980], 4 Can. Bus. L. J
290.
83
See supra, II.B.

90 Yearbook of Private International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

rule] and under both of these laws the same standard terms prevail [i.e. the standard
term first referred to]", so that it is governed by Art. 6(1 )(b) 1st alt. of the Hague
Principles. Since in scenario 2b the first-shot was fired by A designating Dutch law
in its standard terms, Dutch law applies and no recourse to objective connecting
factors is to be made.

4. Scenario 3: One Designated Law Applies a First-Shot Rule, the Other a

last-shot rule [Art. 6(1)(b) 2nd aft. of the Hague Principles]

Scenario 3: A makes an offer designating Dutch law in its standard terms as

the applicable law; B, established in the UK, declares acceptance providing
in its standard tenns the application of English law.
In scenario 3, both parties designate different laws in their standard terms. These
laws apply different rules when it comes to dealing with battle of forms situations
(Dutch law applies a first-shot rule contrary to the last-shot rule prevailing in
English law). This scenario thus addresses the situation not of a false but of a true
conflict: The parties have designated different laws under which the battle of forms
is won by different parties.
This scenario is governed by Art. 6(1 )(b) 2nct alt. of the Hague Principles: "if
the parties have used standard terms designating different laws and [ ... ] if under
these laws different standard terms prevail, [ ... ] there is no choice of law". In such
situations, the choice of law clauses in the parties' standard tenns thus knock each
other out, no standard terms prevail, there consequently is no choice of law, and
the law applicable to the contract is to be determined by way of objective
connecting factors. In the following procedure, the choice of law clauses in the
standard terms are then to be disregarded.

5. Scenarios 4a and b: At Least One of the Designated Laws Applies a

Knock-Out Rule [Art. 6(1)(b) 3'd alt. of the Hague Principles]

Scenario 4a: One party makes an offer designating Chinese law in its
standard terms. The other party declares acceptance providing in its standard
terms the application of French law.
Scenario 4b: A German, Swiss, or Austrian party makes an offer designating
German, Swiss, or Austrian law respectively as the law applicable to the
contract. The other party, established in France, Poland, Estonia, or
Lithuania, declares acceptance providing in its standard terms the
application of the French, Polish, Estonian, or Lithuanian law.
Scenario 4a addresses the situation in which both parties designate different laws in
their standard terms, one of these laws applying a last-shot rule (the Chinese
Contract Act of 1999, e.g. 84), the other a knock-out rule (French law, e.g. 85 ).

84
See supra (note 12).
85
Supra (note 18).

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 Thomas Kadner Graziano

Scenario 4b finally addresses the scenario which is in practice arguably

rather frequent, s6 that both parties designate different laws, both of them applying
knock-out rules.
Once again we are dealing with a true conflict without being in a position to
determine consent of the parties as to the applicable law. These scenarios are
addressed by Art. 6(1 )(b) 3rct alt. of the Hague Principles: "the parties have used
standard terms designating different laws and under one or both of these laws no
standard terms prevail" . Consequently "there is no choice of law" (3rct alt. in fine)
and objective connecting factors are needed in order to determine the law
applicable to the contract.

C. Level of Precision of the Comparison under Art. 6(1) of the Hague

Principles

As seen above,s 7 some laws give a different answer to the battle of forms
depending on the circumstances. In Dutch law, e.g., a first-shot rule applies in
principle.ss If however the other party rejects the first standard terms explicitly in a
separate statement (i.e. not only in its own standard terms) and if the standard
forms in the second shot differ only with respect to minor points when compared to
the terms referred to in the first-shot, a last-shot rule applies instead.s9 If, on the
contrary, the other party rejects the first standard terms explicitly and the second
terms differ considerably from those in the first-shot, a knock-out rule may apply.9°
Given that in some jurisdictions different rules may apply depending on the
circumstances of the case, the question is whether Art. 6(1) of the Hague Principles
refers to the outcome under the respective domestic law in general or to the
outcome in the specific case under examination.
Under Art. 6 (I )(b) of the Hague Principles, in a given case it needs to be
established whether under both designated laws "the same standard forms prevail
[ ... ], different standard terms prevail, or[ ... ] no standard terms prevail". 91 It thus
needs to be shown that, under each law designated respectively, the standard terms
of the party designating this law meet, in principle, the conditions set for the
inclusion of standard terms (i.e. that there definitely is a battle of forms), and that,
under both laws, in the battle of forms situation under examination the same
standard terms prevail. The terms definitely need to prevail which is to be
established for the precise case under examination.

s6 For the more and more widespread use of knock-out rules, see supra, 11.C.
s1 II.D.
88
Dutch Civil Code, Art. 6:225(3) 1' 1 alt.
89
Dutch Civil Code, Art. 6:225(3) 2e alt. and (2); C.B.P. MAHE (note 16), at para. 3.
9
°C.B.P. MAHE (note 16), at para. 3.
91
• Emphasis added.

92 Yearbook of Private International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

D. An Evaluation of the Hague Solution when Compared with Possible

Alternatives

I. Benefits of the Principles with Respect to their Competitors

The above scenarios show that the Hague Principles provide an explicit solution
for all possible choice of law scenarios in battle of forms situations. Contrary to the
first of the alternative solutions presented above, 92 under the Principles no recourse
to the !ex fori is necessary. In contrast with the second proposal, the Principles
respect the parties' desire to avoid objective connecting factors and to have their
choice respected as much as possible and notably in situations of a false conflict
with respect to the choice of the applicable law. Contrary to the third of the above
solutions, the Principles avoid proceeding in a two-step approach (i.e. determining
the applicable law first by way of objecting connecting factors and then respecting
the choice in the prevailing standard forms) and they thus avoid deciding the battle
of forms under a law that is eventually not applicable. The Principles' approach to
the battle of forms is less complex than the fourth of the above proposals and,
contrary to the fourth approach, the Principles analyse the choice of law for one
single contract (instead of presuming the existence of two agreements for the sake
of the analysis). The Hague solution is very much in line with the fifth of the above
proposals and shares the same benefits: They do not systematically give preference
to any of the parties or any of the laws designated and they achieve very reasonable
results in the different battle of forms situations; the knock-out rule is applied only
when there is a true conflict between the solutions to the battle of forms under the
laws designated by the parties in their respective forms; in situations of false
conflicts the parties' choice eventually prevails. Compared to the sixth of the above
approaches, the Hague solution is at a lower level of complexity while still
achieving very reasonable results.

2. Challenge: Determining the Solutions to the Battle of Forms Situation

under Foreign Laws - a Duty of the Parties to Co-operate?

When applying Art. 6(1) of the Hague Principles the challenge lies in determining
the precise solutions for the battle of forms situation under examination in the laws
designated by the parties. This challenge is twofold: first of all, there is an
information problem. According to Art. 6(l)(b) it needs to be established whether,
under both of the designated laws, "the same standard terms prevail". For the court
it might be difficult to determine the content of the applicable foreign law and to
determine whether, in the case at hand, it applied a first-shot, last-shot or knock-out
rule.
Consequently, during the meeting of the Special Commission at The Hague
in November 2012, the delegation of the European Union suggested providing a

92
Supra, III.B.

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 Thomas Kadner Graziano

duty of the parties to co-operate with regard to finding and companng the
applicable law under Art. 6 of the Hague Principles. 93
In fact, the parties to the contract (or their lawyers), having designated the
respective laws in their standard forms, should well be able to co-operate with
regard to finding the applicable rule to battle of forms scenarios under the law
designated in their forms . For the courts a duty of the parties to co-operate would
certainly be helpful and make the solution easier to apply. The duty could be
created, as the case may be, when the Principles are adopted by national or
international legislators. When looking for inspiration, Art. 16(1) of the Swiss
Federal Act on Private International Law (on the "Establishment of foreign law")
might be taken into consideration94 stating that "[t]he content of the applicable
foreign law shall be established ex officio. [However] [t]he assistance of the parties
may be requested. In the case of pecuniary claims, the burden of proof on the
content of the foreign law may be imposed on the parties."
A second challenge lies in the fact that, at the substantive law level, some
laws are still unclear when it comes to solving battle of forms situations, even for
lawyers trained in the respective jurisdiction. In these situations it will be
impossible to establish that "under both of these [designated] laws the same
standard terms prevail". The consequence for the purpose of Art. 6 of the Hague
Principles should then be that since an agreement on the applicable law cannot be
established "there is no choice oflaw", Art 6(1)(b) in fine.

V. Conflicting Choice of Law between Domestic Laws

and the CISG
A. Introduction

In the situations analysed so far, choices were to be made between domestic legal
systems in areas of law where no uniform laws apply. The following chapter
addresses situations of possibly conflicting choices when the uniform sales law of
the United Nations Convention on Contracts for the International Sale of Goods
(CISG) enters into consideration. The CISG is currently in force in almost 80
countries worldwide, including the USA, Canada, Russia, China, Japan, most
South American States (apart from Brazil and Bolivia), Australia, Singapore, most

93
The drafters of the Commentary to Art. 6 are invited to address this issue, see:
Draft Hague Principles as approved by the November 2012 Special Commission meeting on
choice of law in international contracts and recommendations for the commentary, Agreed
additions, Art. 6, in <www.hcch.net/upload/wop/contracts2012principles_e.pdf> (last
consultation: 30.6.2013).
94
English translation in <www.umbricht.ch/pdf/SwissPIL.pdf> (last consultation:
30.6.2013) .

94 Yearbook ofPrivate International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle of Forms Situations

EU Member States (except the UK, Ireland, Portugal and Malta) and Switzerland. 95
The possible interactions between the CISG and the Hague Principles are again
illustrated using case scenarios.

B. Case Scenarios

J. Scenario 5: Choice of Law Clause in the Standard Forms of One Party

Only; the Designated Law is the Law of a Contracting State to the CISG

Scenario 5: Party A to a transnational sales contract designates in its

standard forms the law of Contracting State A to the CISG; party B's
standard forms do not contain a choice of law clause. The case is to be
analysed from the perspective of a Contracting State to the CISG. 96

In Contracting States to the CISG, judges are treaty-bound to apply the CISG
provided that the conditions of application of Art. 1( 1) of the CISG are met.
According to its Art. 1(1 ), the CISG "applies to contracts of sale of goods between
parties whose places of business are in different States: (a) when the States are
Contracting States; or (b) when the rules of private international law [of the
forum ]97 lead to the application of the law of a Contracting State".
If, in scenario 5, the places of business of both parties are in different
Contracting States to the CISG, the CISG applies by virtue of its Art. l(l)(a) unless
the parties have excluded the application of the CISG (Art. 6 CISG). The choice of
the law of a Contracting State to the CISG (in scenario 5: the choice of law A in
A's standard terms) is not regarded as an exclusion of the CISG 98 •
If one of the parties does not have its place of business in a Contracting
State, the CISG still applies if the PIL of the forum designates the law of a
Contracting State, Art. l(l)(b) of the CISG. Whether the parties to an international
contract can choose the applicable law, and if so, under which conditions, is
determined by the PIL of the forum. In EU Member States e.g., Art. 3 of the Rome
I-Regulation establishes (or confirms) the parties' freedom to choose the applicable

95
Text, list of Contracting States and case-law on the CISG, available at
<www.unilex.info>. For the situation in the UK see S . Moss, Why the United Kingdom Has
Not Ratified the CISG, [2005-06] 25 Journal ofLaw and Commerce 483.
96
For the application of the CISG in non-Contracting States if the PIL of the forum
designates the law of a Contracting State, see Th. KADNER GRAZIANO, The CISG Before The
Courts Of Non-Contracting States? - Take foreign sales law as you find it, YPIL 2011, 165 .
97
It is u nanimously understood that Art. 1( 1)(b) CISG refers to the PIL rules of the
forum, see e.g. F. FERRARI, Contracts for the International Sale of Goods, Leiden/ Boston
2012, p. 76 with further references; J. FAWCETT/ J. HARRIS/ M . BRIDGE (note 48), at
para. 16.26; I. SCHWENZER! P. HACHEM, in P. SCHLECHTRIEMI I. SCHWENZER (eds) (note 13),
Art. 1, para. 32; L. M ISTELIS, in S. KROLL/ L. MISTEUS/ P. PERALES VISCASILLAS (note 2),
Art. 1, para. 51; K . SIEHR, in H . HoNSELL (ed.), Kommentar zum UN-Kaufrecht (2"d ed.),
Heidelberg 2010, Art. 1, paras 4, 16; R. HAUSMANN (note 53), Art. 1, para. 93.
98
L. MISTELIS, in S. KROLL/ L. MISTEU S/ P . PERALES V ISCASILLAS (eds), (note 2),
Art. 6, para. 18 w ith numerous references; SCHWENZER! HACHEM, in P. SCHLECHTRIEM/
I. SCHWENZER (eds) (note 13), Art. 6, para. 14 et seq. with many references.

Yearbook of Private International Law, Volume 14 (201212013) 95

 Thomas Kadner Graziano

law. In scenario 5, A has explicitly designated in its standard forms the law of State
A The question then is whether the parties have validly agreed on the application
of this law.
According to, for example, Art. 10(1) of the Rome I Regulation "[t]he
existence and validity of a contract, or of any term of a contract, shall be
determined by the law which would govern it under this Regulation if the contract
or term were valid." The existence of the choice of law agreement is thus governed
by the law that would govern it if the agreement were valid. 99 If the standard terms
of only one party contain a choice of law clause, the existence and validity of a
choice of law agreement is thus to be determined according to the law designated
in these standard terms, in case 5: A' s forms designating the law of State A
The Hague Principles arrive at the same conclusion: According to Art. 2(1)
of the Principles the parties are free to choose the law applicable to their contract.
Under Art. 6(l)(a) of the Hague Principles, the question of whether a valid
agreement on the applicable law has been formed is to be examined according to
the law that the parties have purportedly agreed to. The agreement on the choice of
law is thus to be analysed under the law designated in A's standard terms, i.e. the
law of State A 100
Consequently, if party A designated in its standard terms the law of
Contracting State A to the CISG, the choice of law agreement is governed by the
law of State A Is this then the CISG (being an integrated part of the law of
Contracting State A) or, as the case may be, the civil code of State A, its code of
obligations or its general case-law on contracts?
There are arguably two reasonable answers to this question: One possible
answer is that the CISG (in particular Art. 14 et seq.) applies not only to the
formation of the sales contract but also to the formation of the choice of law
agreementw 1 (with respect to the issues covered by the CISG 102). If the choice of
law agreement is valid under the CISG, the sales contract then is governed by the
CISG.
Another possible answer is that the starting point for the solution is to be
found in Art. 4 of the CISG. Art. 4 states that: "This Convention governs only the
formation of the contract of sale and the rights and obligations of the seller and the
buyer arising from such a contract." 103 The CISG thus applies with respect to the
contract of sale only. The choice of law agreement, being a separate contract, is

99
Art. 3(5) and 10 of the Rome I-Regulation; see supra, III.A. and IV.B.1.
10
° Compare supra, N.B. l.
101
This is currently the dominant opinion, see e.g. A. DUTTA (note 44), at 463 fu. 12:
"Statut des CISG-Abwahlvertrages sind hinsichtlich des rechtlichen Zustandekommens die
Vertragsabschlussregeln der Art. 14 ff. CISG"; F. FERRARI, Zurn vertraglichen Ausschluss
des UN-Kaufrechts, ZEuP 2002, 737, 742; R. HAUSMANN (note 53) Art. 10 Rom I-VO,
para. 36 in fine (opting for an "entsprechende Anwendung" of the CISG); S. MAIRE (note
44), at 104 et seq. and 152 et seq.; L. MOLL (note 5), at 183 et seq.; AG Kehl 6.10.1995,
CISG-online 162.
102
For important the limits of the CISG with respect to issues concerning the validity
of the contract, see Art. 4(a) of the CISG.
103
Emphasis added.

96 Yearbook of Private International Law, Volume 14 (201212013)

 Conflicting Choice ofLaw Clauses in Battle ofForms Situations

not governed by the CISG but by country A's (non-unified) general contract law.
If, in scenario 5, the choice of law agreement is valid under the general contract
law of State A (a Contracting State to the CISG), the CISG then applies to the sales
contract. - Given that the CISG only governs some issues of contract formation
(notably consent in general) while leaving others out (such as the validity of the
contract or any of its provisions, notably specific conditions and requirements with
respect to standard terms), 104 this solution would have the benefit of applying one
single law (even though a non-unified one) to the formation and to the validity of
the choice of law agreement. This solution would further avoid the application of
Art. 19 of the CISG with regard to the choice of law clause. Given that the
interpretation of Art. 19 of the CISG is currently highly controversial, this might be
seen as a further benefit of the second approach.

2. Scenario 6: Exclusion of the CISG in the Standard Terms of one Party

Scenario 6: Party A to a transnational sales contract designates in its

standard forms the law of CISG Contracting State A as the law applicable to
the contract. Party B designates the law of Contracting State B but explicitly
excludes the CISG. The general contract law of State B provides a knock-out
rule.
According to Art. 6 of the CISG, the parties may exclude the application of the
CISG. B provides an exclusion of the CISG in his standard terms whereas A does
not. With respect to the battle of forms, the case falls under Art. 6(l)(b) 3'd alt. of
the Hague Principles: A's standard terms designate the CISG (providing either a
first-shot or a knock-out rule, according to the interpretation of the CISG); B 's
standard terms exclude the CISG (which is possible under Art. 6 of the CISG) and
designate the non-unified domestic law of B instead, providing a knock-out rule. In
this scenario, under one (or both) of the designated laws no standard terms prevail,
and "there is no choice oflaw."

3. Scenario 7: One Party Designates in its Standard Terms the Law of a

Contracting State to the CISG, the Other the Law of a Non-Contracting
State

Scenario 7: Seller A has its place of business in non-Contracting State A to

the CISG (e.g. England). He designates in his standard terms the law of A.
The courts of A apply a last-shot rule. Buyer B's place of business is in
Contracting State B (e.g. Switzerland). He designates in his standard forms
the law of B. The general contract law ofB provides a knock-out rule. Seller
A fires the last shot. The case is brought before the courts of a Contracting

104
See Art. 4 of the CISG: "This Convention governs only the formation of the
contract of sale [ ... ]. [I]t is not concerned with: (a) the validity of the contract or of any of
its provisions[ ... ]."

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 Thomas Kadner Graziano

State to the CISG (e.g. Switzerland). Under the PIL of the (e.g. Swiss) forum
the parties may choose the applicable law. 105
The court in a Contracting States to the CISG (e. g. Switzerland)1°6 is treaty-bound
to analyse the conditions of application of Art. I (1) of the CISG. Since the seller
has its place of business in a non-Contracting State to the CISG (e.g. England), the
conditions of Art. 1(1) lit. (a) of the CISG are not fulfilled. The CISG still applies
to the sales contract if the PIL of the forum designates the law of a Contracting
State, Art. l(l)(b) of the CISG. Under the PIL of the Forum, the parties may
choose the applicable law (e.g. Art. 116 of the Swiss PIL Act). A has designated in
its standard terms the law of a non-Contracting State to the CISG (English law), B
the law of a Contracting State (Swiss law). The question is how to decide the battle
of forms with respect to the choice of law clauses (and, consequently, which law to
apply to the choice of law agreement and - if the choice of law agreement is valid
- to the main contract).
With respect to the choice of law clause, scenario 8 is a battle of forms
situation. So far, neither the Rome I Regulation, nor Swiss PIL, nor any other
existing black letter rule on PIL addresses the issue of the law applicable to the
choice of law in battle of forms situations. The Hague Principles, on the contrary,
state in Art. 6(1)(b)1 st alt. that "if the parties have used standard terms designating
different laws and under both of these laws the same standard terms prevail, the
law designated in the prevailing terms applies". The question then is whether under
both designated laws the same standard terms prevail.
In case 8, A has designated the law of a non-Contracting State to the CISG
applying a last-shot rule (e.g. English law). - B has designated the law of a
Contracting State (e.g. Swiss law). With respect to the law applicable to the sales
contract, the choice of the law of a Contracting State comprises also the CISG (in
particular its Art. 19). The question is, however, whether this is also the case with
respect to the choice of law agreement. Under the CISG, there are two possible
answers to this question 107 :
(a) If the law of a Contracting State to the CISG is designated, the CISG
applies both to the sales contract and to the choice of law agreement. 108 The battle
of forms is then decided under Art. 19 of the CISG. Art. 19 of the CISG may be
understood as a last-shot rule (which is most controversial),1°' just as English law.
Consequently then, under both designated laws (English law and the CISG), the
same standard terms prevail: i.e. the standard terms of the English seller firing the
last shot. According to Art. 6( 1)(b) I st alt. of the Hague Principles the law
designated in the prevailing terms (English law) thus applies. If under English law
the choice oflaw agreement is valid, the sales contract is governed by English law.
Issues not covered by the CISG: For issues not covered by the CISG (such
as questions regarding the validity of the contract, Art. 4 lit. b) of the CISG), under

105
Art. 116 of the Swiss Federal Act on Private International Law.
106
For the perspective of a non-Contracting State, see the reference supra (note 96).
107
See supra, I.
108
See supra, I.
109
See the references supra (note 13) on the one hand, and (note 27) on the other.

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English law a last-shot rule prevails whereas under Swiss general contract law a
knock-out rule applies. In this case, under one of the designated laws "no standard
tenns prevail", "there is no choice of law" (Art. 6( 1)(b) 3rd alt. of the Hague
Principles), and the law applicable to the contract is determined by way of
objective connecting factors.
Variation: If under the CISG a knock-out rule applied (instead of a last-shot
rule), 110 the case would be governed by Art. 6(l)(b) 3rd alt. of the Hague Principles.
There would be "no choice of law", and objective connecting factors would be
needed to determine the law applicable to the contract.
(b) The second possible interpretation argues as follows: The choice of the
sales law of a Contracting State to the CISG includes, in principle, the CISG.
However, the choice of law agreement itself (being a separate contract, not
governed by the CISG) is governed by the general contract law of the designated
State.
English law applies a last-shot rule, Swiss general contract law a knock-out
rule. According to Art. 6(l)(b) 3rd alt. of the Hague Principles, if "under one or
both of [the chosen] laws no standard tenns prevail, there is no choice oflaw". The
law applicable to the contract is then to be detennined by way of objective
connecting factors.
When the CISG enters into consideration, the outcome thus much depends on
several disputes concerning the interpretation of the CISG. Ambiguities of the
CISG and uncertainties concerning its interpretation can unfortunately, but
obviously, not be solved by the Hague Principles.

VI. Conclusions
Currently, in basically every jurisdiction analysed, there is very much uncertainty
as to how to solve the problem of conflicting choice of law clauses in standard
terms. The issue has so far never been explicitly addressed in a black letter rule,
neither in the Rome I Regulation nor the Hague Sales Conventions nor in any other
international instrument or national PIL statute. Case-law on this issue is rare and
the law is complicated to the point that the courts try to avoid the problem, they
bypass the issue at the PIL level or they simply apply the !ex fori without even
addressing the problem. 111 The international legal doctrine currently suggests six
different solutions to the problem, some of considerable complexity. 112
As long as the solution to the battle of forms with regard to choice of law is
unclear, it is wholly unforeseeable for the parties which law governs their
contractual relationship. They then lack the most fundamental basis for their
11
°For references supporting this view, see supra (note 27).
111
See the numerous references by M.J. SHARIFF/ K. MARECHAL DE CARTERET (note
1); L. MOLL (note 5), at 202 with references; see e.g. OLG Frankfurt, IPRax 1988, 99.
112
Supra, III.B.1-6. When trying to teach the issue of conflicting choice of law
clauses in standard terms, one might quickly be tempted to abandon the idea of mentioning
it at all, given that the issue is so controversial and the outcome so vague.

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 Thomas Kadner Graziano

negotiations should a problem in their contractual relations arise. 113 With respect to
a solution to the problem of conflicting choice of law clauses, the law currently
leaves the parties alone.
During the negotiations leading to the Hague Principles on Choice of Law
for International Contracts in November 2012, the experience was that by
addressing case scenarios on conflicting choice of law clauses in standard terms, it
was possible to find consensus with respect to a reasonable solution for any of
them. Based on the solutions agreed upon, a rule achieving these solutions was
drafted. This procedure eventually resulted in Art. 6 of the Hague Principles. The
purpose of this provision is to promote party autonomy on the one hand and, on the
other, to enhance legal certainty and foreseeability with respect to the law
applicable to choice of law clauses in battle of forms situations.
In a first comment it was argued that Art. 6 of the Hague Principles is too
complicated when compared with competing solutions suggested in legal
doctrine? 114 It would possibly be easier to apply a knock-out rule on the PIL level
and to entirely disregard choice of law clauses when the parties point to different
laws in their standard terms. 115
There is, however, a widespread discomfort in international legal doctrine
with respect to such a solution, 116 and arguably rightly so. Art. 6(l)(b) of the Hague
Principles thus upholds party autonomy when the conflict is only a false conflict,
i.e. in cases in which, under the laws chosen by the parties, the same standard
terms prevail. The Principles will be accompanied by an official commentary that
will facilitate their use. In order to further facilitate the application of Art. 6,
comparative legal doctrine might help clarifying the solutions in force at the
substantive law level in as much jurisdictions as possible with respect to battle of
forms scenarios. 117

113
A. BOGGIANO (note 74), at 40: "Conflicts arising out ouf choice-of-law clauses
are particularly embarrassing"; L. MOLL (note 5), at 188: "Die Kollision vorformulierter
Rechtswahlklauseln ist das paradoxe Ergebnis einer umsichtigen und vorausschauenden
Vertragsgestaltung international agierender Handelspartner. In der Praxis wird den
Untemehmem regelmaBig empfohlen, ihren AGB eine Rechtswahlklausel hinzuzufiigen, um
die Unwagbarkeiten der Anwendung eines fremden Rechts zu vermeiden. Diese
Empfehlung schliigt fehl, wenn ihr beide Parteien folgen." Im Ergebnis wird dann "das
Rechtswanwendungsergebnis unvorhersehbar."
114
See the critical appreciation by 0. LANDO (note 75), at 314 et seq.
115
If one day the knock-out rule has become the prevailing rule worldwide at the
substantive law level, the proposal of a knock-out rule at the PIL as the only rule to follow
will have to be reconsidered. The above comparative overview (supra, II) shows however
that such uniformity is far from being achieved. Should such uniformity be achieved one
day, the Hague Principles' Art. 6(1)(b) 2°d and 3rd alt. will apply containing a knock-out rule
at the PIL level.
116
See the proposals and solutions presented supra, III.B.3.-6.
117
The author of this contribution is currently preparing such a comparative
overview at the substantive law level.

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By suggesting a black letter rule addressing the issue, the Hague Principles
make a substantial contribution to solving the riddle of conflicting choice of law
clauses in battle of forms situations. In a first commentary, Ole LANDO has
suggested to address this issue also in the next revision of the Rome I Regulation. 118
Hopefully the Hague Principles will prevent the battle of the forms in transnational
scenarios from continuing for yet another "hundred years" and they will not just be
another "attempt to end the battle" proving "only to inflame it" .119

118
0. LANDO (note 75), at 316: "I have mentioned a few points - rules of law and
battle of forms[ ... ] where, in my view, the Principles may give rise to consider a revision of
Rome I."
119
See supra, p. 1 and fu. 1.

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