No. A good faith doctrine at negotiating stage is considered repugnant to ‘the adversarial nature of negotiations’ (Walford v Miles [1992]). Note, however, that a number of equitable doctrines such as unconscionable bargain and misrepresentation in Irish jurisprudence accomplish much the same results as a good faith code.
‘Battle of the forms’ disputes
How are ‘battle of the forms’ disputes resolved in your jurisdiction?
‘Battle of the forms’ disputes continue to be decided upon the particular circumstances of the case. Two main approaches are taken to resolving the issue:
Two recent (2014) judgments of the Irish Supreme Court in Noreside Construction Limited v Irish Asphalt Limited [2014] and James Elliott Construction Limited v Irish Asphalt Limited [2014] were extremely interesting from the ‘battle of the forms’ perspective. Significant discussion related to the question of whether delivery dockets constituted contractual documents and whether terms and conditions referred to as ‘available on request’ on those dockets were incorporated into the contract between the parties.
In Noreside the court held that ‘it is difficult to see how one could be bound by terms and conditions which are not contained in a signed contractual document or by terms and conditions which are never provided, identified or disclosed. ’ In James Elliott Construction it was stated that ‘the party, to be bound, must know what the terms and conditions are (for example, by reference to specific, well-known, industry-wide terms and conditions on the contractual document. )’. The decision of the court was that the terms were not incorporated into the relevant contracts as they were not printed on the dockets.
These judgments reflect a tightening of the rules on ‘battle of the forms’, particularly where the terms to be incorporated into the contract involve the limitation or exclusion of liability.
Is there a legal requirement to draft the contract in the local language?
No. In practice, although Ireland has two official languages, English and Irish, almost all contracts are in the English language.
For online contracts, prior to the conclusion of such contracts by electronic means and prior to an order being placed, certain information must be provided to a purchaser clearly, comprehensively and unambiguously. This includes the language of the contract. Business-to-business (B2B) contracting parties may agree that the information requirements do not apply in respect of the contract. A person who fails to provide this information in the absence of agreement between the parties may be guilty of an offence attracting liability on summary conviction to a fine not exceeding €3,000 or imprisonment for a term not exceeding three months, or both.
The relevant legislation is Directive 2000/31/EC Regulations 2003 (the eCommerce Regulations), which implements part of the E-Commerce Directive (2001/31/EC).
Is it possible to agree a B2B contract online?
Yes. For B2B contracts a click-to-accept process is acceptable provided it is possible to print and save the text of the relevant terms prior to conclusion of the contract.
The Court of Justice of the European Union considered this issue in the B2B context in the May 2015 case of Jaouad El Majdoub v CarsOnTheWeb.Deutschland GmbH relating to an agreement as to jurisdiction under Regulation (EC) 44/2001 (the Brussels I Regulation). In this case it was confirmed that ‘click-wrapping’ fulfilled the requirements for a binding agreement under the Brussels I Regulation. The court held that click-wrapping, where it was possible to print and save the text of the relevant terms and conditions prior to conclusion of the contract, amounted to a contract concluded by electronic means, which provided a durable record of the agreement. The Irish Supreme Court case Ryanair Limited v Billigfleuge.de GmbH/Ticket Point Reisebüro GmbH [2015] confirmed an earlier High Court decision, which reached a similar conclusion.
Statutory controls and implied terms
Controls on freedom to agree terms
Are there any statutory or other controls on parties’ freedom to agree terms in contracts between commercial parties in your jurisdiction?
As a general rule, for B2B contracts, parties are free to agree terms in contracts provided the subject matter of or conduct required by the contract is not unlawful.
Standard form contracts
Are standard form contracts treated differently?
Yes. Although the majority of points of law relating to standard form contracts arise in the context of consumer contracts, B2B contracts can also be affected.
In particular, issues appear with respect to exemption clauses and the position taken by the Irish Supreme Court that the text of such clauses shall be interpreted against the draftsperson. There is also some case law to evidence that a ‘broader duty of good faith will apply’ to clauses not reasonably to be expected by the other party in a standard form contract (Robert Clarke; Contract Law in Ireland (7th edn)).
What terms are implied by law into the contract? Is it possible to exclude these in a commercial relationship?
Irish law implies into any contract for the sale of goods warranties as to:
(ii) quiet possession;
(iii) correspondence to description;
(iv) fitness for purpose;
(v) merchantable quality; and
(vi) correspondence of sample to bulk.
The warranties as to good title and quiet possession may not be excluded.
While it is possible to exclude the implied warranties with respect to items (iii)-(vi) for B2B contracts, the exclusion will not be enforceable unless it is shown that it is ‘fair and reasonable’ to do so. The criteria as to ‘fair and reasonable’ are set out in the Schedule to the Sale of Goods Act 1893 (SGA) as amended by the Sale of Goods and Supply of Services Act 1980 (SSGA) (collectively, SGSSA) but include such items as relative bargaining power, inducements and course of dealing between the parties.
Under the SGSSA, the purchaser is entitled to reject the goods, rescind the contract for breach of implied warranties and, where applicable, claim for damages. This rather onerous remedy is currently under review.
The purchaser may instead opt to ‘set up the breach of warranty’ to obtain a reduction in or extinction of the price or take an action for damages.
As a general rule, warranties can apply in Ireland for up to six years after delivery of the goods. This time frame is based on the limitation period for claims under contract.
The duration of the statutory warranties is for the expected lifetime of the product. The duration thus depends on the particular product.
For services, the following terms are implied into the contract for sale:
For B2B contracts relating to services, these terms may be varied or excluded by express term of the contract, course of dealing or usage.
It is an offence to purport to restrict or exclude implied statutory warranties other than as provided under the SGSSA. A person guilty of an offence under the SGSSA is liable on summary conviction to a fine not exceeding €2,500 or imprisonment for a term not exceeding six months, or both. On conviction on indictment, a person is liable to a fine not exceeding €12,700 or imprisonment for a term not exceeding two years, or both.
Is your jurisdiction a signatory to the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention)?
Good faith in entering and peforming
Is there an obligation to use good faith when entering and performing a contract?
Good-faith obligations are not generally recognised as implied terms in an express contract between parties. This was affirmed in the Irish Court of Appeal case of Flynn and Anor v Breccia and Anor (2017), which overturned an Irish High Court ruling that there was a general principle of good faith in Irish commercial contract law. Express good-faith obligations in contractual clauses may be enforced as ‘it would be a strong thing to declare unenforceable a clause into which the parties have deliberately and expressly entered’ (Walford v Miles [1992]).
Limiting liability
Prohibition on exclusions and limitations
What liabilities cannot be excluded or limited by a supplier in a contract?
A supplier cannot exclude or limit liability for death or personal injury against a consumer arising out of an act or omission of the supplier of goods or services (Unfair Terms in Consumer Contracts Regulations 1995).
In Ireland, B2B contracts are not subject to the Unfair Terms in Consumer Contracts Regulations and the SGSSA does not speak to limitation or exclusion of liability for death or personal injury. The statutory difference in treatment between consumer and B2B contracts relating to such matters may be closed in the forthcoming Consumer Rights Bill.
Are there any statutory controls on using financial caps to limit liability for breach of contract?
Under the SGSSA, for B2B contracts, any exemption clause relating to breaches of the implied warranties shall not be enforceable unless it is fair and reasonable to do so.
Are there any statutory controls on indemnities used to cover liability risks in contracts?
Indemnities against criminal liability or unlawful conduct are prohibited as a matter of public policy.
Are liquidated damages clauses enforceable and commonly used in your jurisdiction?
Liquidated damages clauses, where the damages payable are ‘a genuine pre-estimate of damage’, are enforceable and commonly used in Ireland. Penalty clauses are not enforceable.
The decision in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] remains the reference case in determining whether a clause amounts to a liquidated damages clause or a penalty clause.
The case contains four principles for consideration and it has been incorporated into Irish law in Irish Telephone Rentals Limited v Irish Civil Service Building [1991].
Pursuant to Dunlop, a clause is a penalty clause, and therefore unenforceable in the following circumstances:
The final aspect to the test is that a clause will not be deemed to be a penalty clause merely because at the time of agreeing the clause it was impossible to precisely pre-estimate the damages to occur where there is a breach.
A reformulated test was applied by the UK Supreme Court in the recent Cavendish Square Holding BV v Talal El Makdessi [2015]. This test is whether the clause ‘imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation’.
A recent High Court judgment upheld the Dunlop approach in Ireland (Flynn & Anor v Breccia [2016]). While the court was cognisant of the Cavendish approach, it could not depart from the jurisprudence of judges of equal rank.
Payment terms
Statutory time limits on payments
Are there statutory time limits for paying invoices? Is it possible to agree a different payment period?
Yes. Where there is no agreed date for payment between contracting parties, a payment becomes late when 30 days have elapsed, unless an alternative payment period is specified in an agreed contract. Both parties can agree to extend payment terms up to 60 days. Time limits can be extended beyond 60 days only by the parties expressly agreeing in the contract to do so and where the extension of time is not grossly unfair to the supplier. Different rules apply to contracts with public authorities. The relevant legislation is the Late Payments in Commercial Transactions Regulations 2012 that implement Directive 2011/7/EU on combating late payment in commercial transactions.
Late payment interest
Is statutory interest charged on late payments? Is it possible to agree a different rate of interest?
The interest rate chargeable for late payments is the European Central Bank’s most recent main refinancing rate carried out before 1 January or 1 July in each year plus eight percentage points unless otherwise agreed. This interest rate is payable on the amount outstanding for the period beginning on the day after the relevant payment date and ending on the date on which the payment of the amount due is made.
A different rate of interest may be specified in an agreed contract.
What are the civil penalties for failing to comply with statutory interest rate or late payment of invoices?
Where a contract purports to waive or vary a term of a contract between a purchaser and supplier as to the relevant payment date (where the date is not specified) or the implied term as to entitlement to interest on late payments and the supplier considers that the waiver or variation is grossly unfair, the supplier may apply to the circuit court or to an arbitrator for an award:
The regulations also provide the following implied term in every commercial transaction; where statutory late payment interest becomes payable, the supplier is also entitled to compensation towards the relevant recovery costs incurred by the supplier as a consequence of late payment.
Representative bodies may apply to the circuit court for an order under the regulations where a contractual term drawn up for general use purports to vary the relevant payment date of the implied term as to entitlement to interest.
Termination
Do special rules apply to termination of a supply contract that will be implied by law into a contract? Can these terms be excluded or limited by including appropriate language in the contract?
The parties to the contract may make express provision for the termination of the contract in stated circumstances. In common law the parties are free to agree as they please, but they may be subject to statutory restrictions such as may derive from the SGSSA, which require that clauses for supply of goods or services that affect the implied warranties under the SGSSA shall not be enforceable unless it is fair and reasonable to do so.
If a contract does not include a notice period to terminate a contract, how is it calculated?
There is no statutory notice period for termination of a contract. Where the contract does not include a notice period, but allows for termination upon notice, it is unclear whether notice takes effect on the sending or the receipt of the notice unless this is specified within the relevant term.
Automatic termination on insolvency
Will a commercial contract terminate automatically on insolvency of the other party?
No. Where this is the desired result, a provision should be included in the contract to provide for termination of the contract in circumstances such as insolvency, winding-up, appointment of a receiver or a liquidator or upon the entering into a scheme of arrangement.
Termination for financial distress
Are there restrictions on terminating a contract if the other party is in financial distress?
As there is no statutory right to terminate a contract where a party is in ‘financial distress’, the ability to terminate and restrictions on such termination will generally be derived from the provisions of the contract.
Is force majeure recognised in your jurisdiction? What are the consequences of a force majeure event?
The doctrine of frustration is recognised in Ireland. This occurs where circumstances beyond the control of the parties mean that the contract can no longer be performed. Where the contract is frustrated, the future obligations of the contract can no longer be performed and therefore the parties are discharged from their obligations. In general, frustration discharges the obligations with respect to the entire contract unless there are distinct obligations that can be severed from the contract as a whole.
In practice, contractually agreed force majeure clauses are considered more favourable than relying on the limited remedies provided under the doctrine of frustration. It is more common to provide for and define circumstances beyond the control of the parties in the contract and then pre-agree terms on an orderly course to either perform the contract in a limited or different manner or exit the contract.
Subcontracting, assignment and third-party rights
Subcontracting without consent
May a supplier subcontract its obligations under the contract without seeking consent from the other party?
Yes, a supplier may subcontract provided there is no express provision to the effect that subcontracting is prohibited (in limited or all cases).
Are there any statutory rules that apply to subcontracting in your jurisdiction?
With respect to subcontracting in the construction, forestry and meat- processing sectors, there are requirements on contractors to file and deduct a ‘relevant contracts tax’ pursuant to the Tax Consolidation Act 1997 (as amended) with respect to payments to contractors. In addition, and also relating to the construction industry, the Construction Contracts Act 2013, yet to be commenced at the time of writing, requires prompt payment practices throughout the construction industry aimed in particular at subcontracting arrangements.
Assignment of rights and obligations
May a party assign its rights and obligations under the contract without seeking the other party’s consent?
In general, yes. A party may assign its rights and obligations under a contract without seeking the other party’s consent. Exceptions to this rule occur where the contract is personal in nature or where there is an express provision to the effect that the contract is not assignable (with or without consent). In practice, few contracts are silent on the issue of permitted or non-permitted assignments.
What statutory controls apply to the assignment of rights or obligations under a supply contract?
The Supreme Court of Judicature (Ireland) Act 1877 permits assignment of a debt or other legal cause in action provided the assignment is absolute and in writing, and provided notice in writing has been provided to the relevant party (section 28(6)). Note it is not possible to assign a cause in action where the assignee has no interest or connection with the underlying claim. This is considered to be champerty and the rule against champerty was upheld in a recent judgment of the Irish High Court relating to litigation funding (Persona Digital Telephony Ltd and Sigma Wireless Networks Limited v The Minister for Public Enterprise and Ors [2016]).
Enforcement by third party
How may a third party enforce a term of the contract?
Privity of contract rules apply in Ireland. There is no equivalent to the United Kingdom’s Contracts (Rights of Third Parties) Act 1999 in Irish statute. Therefore, the general rule is that only parties to a contract may sue on the basis of that contract.
There are what Robert Clarke, author of Contract Law in Ireland, describes as ‘piecemeal legislative reforms’ (7th edn, page 600) in place in Ireland which in limited instances confer third-party rights, for example providing a right of action to spouses and children in certain circumstances.
Exceptions to the privity rules arise from the laws of agency and the equitable concept of the trust. The privity rules may be circumvented by way of assignment of contract, by collateral warranties (mainly used in construction contracts) or by suing in tort (eg, for negligence).
Disputes
What are the limitation periods for breach of contract claims? Is it possible to agree a shorter limitation period?
The limitation period for contract claims is six years from the date the cause of action accrues. In Ireland, the cause of action accrues at the date of the breach of the contract, not the date of knowledge of the breach or the date the damage occurs.
Do your courts recognise and respect choice-of-law clauses stipulating a foreign law?
Yes. For disputes within the EU, choice-of-law clauses are recognised pursuant to Regulation (EC) 593/2008 (the Rome I Regulation).
For non-EU disputes, the courts will generally recognise and respect choice-of-law clauses under common law rules.
Limited exceptions to the above general position arise where the courts may refuse to recognise choice-of-law clauses for public policy reasons or where there are mandatory Irish law considerations, for example with respect to consumer law matters.
Do your courts recognise and respect choice-of-jurisdiction clauses stipulating a foreign jurisdiction?
Yes. For disputes within in the EU, choice-of-jurisdiction clauses are recognised under the Brussels I Regulations as transposed into Irish law under the Civil and Commercial Judgments Regulations 2002 and, for disputes in proceedings commenced on or after 10 January 2015, Regulation (EU) 1215/2012 (the Recast Brussels I Regulation) as transposed into Irish law by the Civil and Commercial Judgments Regulations 2015. To be enforceable, pursuant to article 23 of the Brussels I Regulation or article 25 of Recast Brussels I Regulation, the agreements conferring jurisdiction should be:
In addition, the Recast Brussels I Regulation clarifies that the validity of the agreement conferring jurisdiction cannot be contested solely on the ground that the contract is not valid.
Note that the default position for disputes within the EU is that persons domiciled in EU shall be sued in the courts of the state in which they are domiciled.
In the case of Ryanair Limited v Billigfleuge.de GmbH/Ticket Point Reisebüro GmbH [2015] IESC 11, which related to the agreement as to choice of jurisdiction under the Brussels I Regulation, the Irish Supreme Court stated that ‘since the primary rule for the place of trial is the domicile of the defendant, exceptions to Article 2 [the default position - now reflected in article 4 of the Recast Brussels I Regulation] should be scrutinised carefully to ensure that any other mechanism for establishing jurisdiction under any other article of the Regulation is properly made’.
Where the dispute involves parties domiciled in countries that are not signatories to the Recast Brussels I Regulation, its predecessor or the Lugano Convention, the common law rules of ‘most appropriate forum’ apply.
Limited exceptions to the above general position arise where the courts may refuse to recognise choice-of-jurisdiction clauses for public policy reasons or where there are mandatory Irish law considerations, for example with respect to consumer law matters.
Efficiency of local legal system
How efficient and cost-effective is the local legal system in dealing with commercial disputes?
There has been a slow but steady increase in the use of alternative dispute resolution in Ireland, however, High Court litigation remains the primary method of resolving commercial contract disputes. The High Court has jurisdiction to hear cases with a value of claim in excess of €75,000. The 2014 Courts Service Annual Report states that waiting times for a hearing are up to nine months from certification of the case as ready for trial.
For high-value commercial disputes an application can be made to transfer the case to the Commercial Court. The Commercial Court operates an expedited case progression process where the case may be concluded within six months of admittance to the list. The cases that are most likely to be transferred are where the value of the claim exceeds €1 million. Admission to the list is at the discretion of the court. The speed of resolution can entail increased costs due to the pressure on the parties to comply with a constrained timeframe, particularly where the matter involves a large amount of documentation or is particularly complex. The 2014 Courts Service Annual Report states that the waiting time from first return date to trial of the full hearing is one week to four months, depending on the time required for the hearing.
Ireland’s new Court of Appeal is having a substantial impact on the backlog in dealing with appeals to the Supreme Court and has greatly improved the efficiency of the overall court system in the process.
New York Convention
Is your jurisdiction a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Which arbitration rules are commonly used in your jurisdiction?
Yes. Ireland applies this Convention only to recognition and enforcement of awards made in the territory of another contracting state.
The UNCITRAL Model Laws have force of law in Ireland pursuant to the Arbitration Act 2010.
Remedies
What remedies may a court or other adjudicator grant? Are punitive damages awarded for a breach of contract claim in your jurisdiction?
Interim remedies such as injunctions are available where there is a serious issue to be tried and where damages would not be an adequate remedy and the balance of convenience is in favour of the granting of the injunction (Campus Oil v Minister for Energy and Ors [1983]).
With respect to final remedies, damages (both special and general) are the most commonly awarded. Equitable remedies such as specific performance and rescission may also be awarded.
Punitive damages are rarely awarded for a claim in contract. They may be awarded for contract claims where there is also a tortious element but this is also uncommon as the courts tend to to award damages for aggravated loss under the tort rather than punitive damages in contract.
