Keio University

Take Home Examination

1. Purchaser X (“X”) is a Japanese company whose main business is the import and sale of

food, and Seller Y (“Y”) is a company incorporated under the law of country A (“A”)

whose main business is the production of local foods in A.

2. Y planned to sell to X its olive oil for consumption in Japan because they have successfully

completed several sale and purchase transactions in the past. X and Y entered into the sale

and purchase contract as attached hereto, in Tokyo in February 2019 (the “Contract”). Y

has owned a 3-storey building in Kyoto where Y has operated a restaurant (the

“Restaurant”) serving A’s local foods, but neither the Restaurant nor its employees were

involved in nor related to the Contract.

3. Because the market price of olives and olive oil in Japan suddenly surged in March 2019, Y

asked X to increase the purchase price under the Contract, which was immediately rejected

by X. Because Y did not deliver to X the olive oils as agreed in the Contract, X terminated

the Contract in June 2019 and brought claims against Y for monetary damages X incurred

from Y’s default.

(Question 1)
X filed a law suit with the Kyoto District Court (the “Court”) claiming for monetary

damages against Y (the “Lawsuit”). Identify two (2) international jurisdictional bases

which would likely grant a Japanese court to adjudicate the Lawsuit with your reasons

and analysis (you may ignore the applicability of CCP Art. 3-9).

Answer:
First International Jurisdictional Base:

According to Article 3-3(i) of the Code of Civil Procedure of Japan, a Japanese Court will have

international jurisdiction over a claim for damages due to nonperformance of a contractual

obligation if the contractually specified place for performance of the obligation is within Japan.

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In the given case, X filed the lawsuit for monetary damages due to non-performance of

contractual obligations by Y and the contractually specified place for performance of the

obligation is within Japan. Therefore, the Kyoto District Court will have international

jurisdiction in this case.

Second International Jurisdictional Base:

According to Article 3-3(iii) of the Code of Civil Procedure of Japan, a Japanese Court will

have international jurisdiction if the action is a claim for the payment of monies, and seizable

property of the defendant is located within Japan (except when the value of such property is

extremely low). In the present case, X filed the case against Y for monetary damages and

seizable property (3-story building) of Y is located in Japan. Therefore, the Court will also have

international jurisdiction.

(Question 2)
Assuming that the Court can duly adjudicate the Lawsuit:

(1) X asserts that the governing law of the Contract should be Japanese laws, but Y assets

that it should be the laws of A. If the Court finds the parties’ choice of governing law only

from the Facts and the wording in the Contract, what will be the Court’s finding on this

issue?

Answer:
According to Article 7 of the Act on General Rules for Application of Laws, “the formation and

effect of a juridical act are governed by the law of the place chosen by the parties at the time of

the act.” It safe-guards party autonomy in relation to choice-of-law contract clauses irrespective

of their connection to the contract and such choice-of-law can be implied or expressed. Where a

choice of law is not made expressly, the governing law of the contract can be determined by

looking at whether the parties have impliedly chosen any country’s law as the governing law. In

the present case, if the governing law is to be found only from the facts of the case and the

wordings in the contract, it can be found that the parties have implicit intention to use Japanese

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law as the governing law of the contract. The reasons are provided as below:

a) Both X and Y entered into the contract of sale and purchase in Tokyo, Japan.

b) Y has planned to sell to X its olive oil for consumption in Japan, and besides, they have

successfully completed several sale and purchase transactions in the past.

c) The delivery place is in Tokyo and the payment was decided to be made in Japanese

Yen.

d) Y represents and warrants that the Product conforms to Japanese food laws and

regulations.

e) Y shall be liable for any defects in the Product, in accordance with Japanese

Commercial Code Art. 526.

Considering the facts above, it is reasonable to find that the contracting parties have an implicit

intention to use Japanese law as the governing law of the Contract. Therefore, the governing law

about formation and effect of the Contract should be Japanese law.

(2) Assuming that the Court finds that the parties did not choose the governing law of the

Contract, how will it be decided?

Answer
According to Article 8 of the Act on General Rules for Application of Laws, “in the absence of a

choice of law..., the formation and effect of a juridical act are governed by the law of the place

with which the act is most closely connected at the time of the act.” The Court will determine

the governing law by determining with which country the juridical act is mostly connected with.

Under Horei, the governing law was determined as per the law of the country where the contract

was concluded. However, according to the new Act, instead of a concrete connecting factor, a

rebuttable presumption was set up. Article 8 of the Act leaves the judges to determine the

governing law in the absence of the choice of law by the parties, and it also allows judges to

rebut the presumption as laid down by the second and the third paragraphs of the said provision,

when it appears from circumstances that the contract is more closely connected with another

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country.

(Question 3)
(Facts) Paragraph 3 is replaced by the following:

“3. When the olive oil which was the product of the Contract arrived in Japan but before

delivery to X, Y’s trade partner Z (“Z”) asked Y to sell them to Z at a higher price than

that in the Contract. Y agreed to Z’s request and delivered the olive oil to Z, which is still

located in Japan.”

(1) If X makes a demand to Z to return the olive oil to X based on X’s real right to the

olive oil (as the ultimate owner of the olive oil), how will the court decide on the applicable

law(s) to the dispute?

Answer:
According to Article 13(2) of the Act on General Rules for Application of Laws, acquisition or

loss of a real right to movables or immovables is governed by the law of the place where the

subject property of the right is situated at the time when the facts constituting the cause of the

acquisition or loss were completed. X is claiming the olive oil from third party Z. There is no

contractual obligations between X and Z. If X were to claim damages from Y or non-

performance of the contractual obligations, then applicable law would have been the governing

law of the contract. This is a different case than that. In the present case, olive oil was located in

Japan at the time of the acquisition and loss of the olive oil. Therefore, Japanese law will be

applicable in this case.

(2) Assuming that Japanese laws are applicable, can X win over Z (you may ignore the

malicious purchaser’s exemption)?

Answer
According to Article 178 of the Civil Code of Japan, “the transfer of a real right on movables

may not be duly asserted against a third party, unless the movables are delivered.” The olive oil

was not delivered to X and before making the delivery to X, Y delivered the olive oil to Z.

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Therefore, X will not be able to win the case against Z due to the fact that Z did not obtain

possession of olive oil.

(Question 4)
Y filed a lawsuit against X in A’s court asking for the declaratory judgment that Y is not

liable for the default or the payment of X’s damages. Although X had duly received the

service of process from A’s court, X did not appear in any court procedures or enter any

plea at all, and thus, A’s court rendered the declaratory judgment in Y’s favor, which

became final and binding in A.

Assuming A’s court would not have any international jurisdictional base to subject X to

this lawsuit if Japanese laws on the international jurisdiction applied, can Y use this

declaratory judgment to dismiss the Lawsuit in Japan? You may limit your analysis on the

issue of “indirect international jurisdiction”

Answer:
“Indirect jurisdiction” is a concept that requires a Japanese court to examine whether a

foreign court has jurisdiction over a case for which a judgment by that foreign court was

delivered. Article 118(1) of the Code of Civil Procedure (CCP) of Japan requires that a

final and binding judgment delivered by a foreign court is valid if, among others, the

jurisdiction of the foreign court is recognized according to the laws and regulations,

conventions, or treaties. It was unclear which country’s laws and regulations Article

118(1) of CCP has referred to, whether the laws and regulations of Japan or those of

foreign country where the judgment was rendered. However, it is now established that

“laws or regulations or conventions or treaties” in §118 (1) shall be those of Japan. Y

could use this declaratory judgment to dismiss the lawsuit in Japan only if A’s court

would have international jurisdictional base when Japanese laws on the international

jurisdiction were applied and other conditions of the Article 118 of the CCP of Japan are

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fulfilled. In the instant case, the requirement of Article 118(1) of the CCP of Japan was

not fulfilled for the purpose of validity of a final and binding judgment rendered by a

foreign court. According to the Article 118, all of the four conditions have to be fulfilled

to recognize the validity of a foreign judgment. Therefore, in the present case, Y cannot

use this declaratory judgment to dismiss the lawsuit in Japan, as A’s court would not

have any international jurisdictional base if Japanese laws on the international

jurisdiction were applied.

II Briefly explain your response to the following question:

against Y and Z were filed in a court in your country, and the other facts in I

above are same, how will your country’s court adjudicate (Q1) to (Q4)?

Question 1
X filed a law suit with a Bangladeshi Court (the “Court”) claiming for monetary damages
against Y (the “Lawsuit”). Identify two (2) international jurisdictional bases which would
likely grant a Bangladeshi court to adjudicate the Lawsuit with your reasons and analysis.

Answer:
First Jurisdictional Base in Bangladesh:

According to Section 20(1) of the Code of Civil Procedure of Bangladesh, suit can be instituted

in the Court within the local limits of whose jurisdiction the defendant carries on business. The

Code did not specify that the business has to be related to the matter for which the suit is

brought. The Court will have jurisdiction if defendant carries on business within its local limits.

Since Y has owns a 3-storey building and operates a restaurant serving A’s local foods in

Bangladesh, the Court will have jurisdiction to adjudicate the case.

Second Jurisdictional Base in Bangladesh:

According to Section 20(3) of the Code of Civil Procedure of Bangladesh, suit can be filed in

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the Court within whose local limits the cause of action, wholly or in part, arises. The cause of

action arose in Bangladesh, since the delivery of olive oil was not made, and therefore, the

Court in Bangladesh will have jurisdiction to adjudicate the case.

(Question 2)
Assuming that the Court can duly adjudicate the Lawsuit:

(1) X asserts that the governing law of the Contract should be Bangladeshi laws, but Y

assets that it should be the laws of A. If the Court finds the parties’ choice of governing law

only from the Facts and the wording in the Contract, what will be the Court’s finding on

this issue?

Answer:
Bangladesh has not enacted any laws regarding private international law and the law of the

country is silent on the applicable law to a contract in respect of cross-border matters. However,

it is to be noted that the legal system of Bangladesh is based on the common law. It is standard

practice for the judges in the Supreme Court of Bangladesh to make reference to the decided

cases from the English legal system. In Bangladesh Air Service (Pvt) v British Airways Plc. (49

DLR (AD) (1997) 187), the Appellate Division of the Supreme Court of Bangladesh has

referred to the observation of Lord Denning in the Tzortzis vs. Monark, (1968) 1 W LR 406

(409) and stated

“If there is an express clause in a contract providing what the proper law is to be,
that is conclusive in the absence of some public policy to the contrary. But where
there is no express clause, it is a matter of inference from the circumstances of the
case”. There is a third and final way, failing either of these, i.e., by judicial
determination of the system of law with which the transaction has the closest and
most real connection.”

Since in the present case, the parties did not decide the governing law, it is upon the Court to

ascertain the implicit intention of the parties as to the governing law of the contract. Therefore,

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from the facts of the case and the wordings in the contract, it can be deduced that the parties

have implicit intention to use Bangladeshi law as the governing law of the contract. The reasons

are provided as below:

a) Both X and Y entered into the contract of sale and purchase in Bangladesh.

b) Y has planned to sell to X its olive oil for consumption in Bangladesh, and besides,

they have successfully completed several sale and purchase transactions in the past.

c) The delivery place is in Bangladesh and the payment was decided to be made in

Bangladeshi money.

d) Y represents and warrants that the Product conforms to Bangladesh food laws and

regulations.

e) Y shall be liable for any defects in the Product, in accordance with Bangladesh laws.

(2) Assuming that the Court finds that the parties did not choose the governing law of the

Contract, how will it be decided?

Answer
Since the Court in Bangladesh found that the parties did not choose the governing law of the

contract, the Court will employ the “most closely connected’ test to determine the governing

law of the contract. Under the test, the Court will consider which country’s law is mostly

connected to the contract, and then, apply the law accordingly.

(Question 3)
“When the olive oil which was the product of the Contract arrived in Japan but before

delivery to X, Y’s trade partner Z (“Z”) asked Y to sell them to Z at a higher price than

that in the Contract. Y agreed to Z’s request and delivered the olive oil to Z, which is still

located in Japan.”

(1) If X makes a demand to Z to return the olive oil to X based on X’s real right to the

olive oil (as the ultimate owner of the olive oil), how will the court decide on the

applicable law(s) to the dispute?

Answer:

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Since the moveable property is located in Bangladesh and the property was transferred to Z

instead of X in Bangladesh, the Court in Bangladesh will decide laws of Bangladesh as the

applicable law.

(2) Assuming that laws of Bangladesh are applicable, can X win over Z (you may

ignore the malicious purchaser’s exemption)?

Answer:
Under the circumstances, X will not be able to win over Z because Z is a bonafide purchaser for

value. Z bought olive oil (1) in good faith (2) for value (3) in the ordinary course of business (4)

without knowledge that his purchase was in violation of the rights of a third party in the goods.

Therefore, Z will be able to retain the goods under the operation of this principle of bonafide

purchaser for value. Besides, according to Section 21 of the Specific Relief Act 1877, a contract

for the non-performance of which compensation in money is an adequate relief cannot be

specifically enforced. In the present case, X can be compensated adequately for the non-

performance of the contractual obligations. Therefore, X’s claim against Z will not sustain.

Question 4:
Y filed a lawsuit against X in A’s court asking for the declaratory judgment that Y is not

liable for the default or the payment of X’s damages. Although X had duly received the

service of process from A’s court, X did not appear in any court procedures or enter any

plea at all, and thus, A’s court rendered the declaratory judgment in Y’s favor, which

became final and binding in A.

Assuming A’s court would not have any international jurisdictional base to subject X to

this lawsuit if Bangladesh laws on the international jurisdiction applied, can Y use this

declaratory judgment to dismiss the Lawsuit in Bangladesh? You may limit your analysis

on the issue of “indirect international jurisdiction”

Answer:

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According to Section 13 of the Code of Civil Procedure, A foreign judgment shall be conclusive

as to any matter directly adjudicated upon between the same parties if the conditions laid out in

the Section are fulfilled. Section 13(f) of the Code provides that if the foreign judgment sustains

a claim in contradiction of any laws in Bangladesh, then such judgment will not be conclusive

and binding upon the court in Bangladesh. Since A’s court would not have any international

jurisdictional base if Bangladesh laws on the international jurisdiction were applied, Y cannot

use this declaratory judgment to dismiss the lawsuit in Bangladesh.

The Sale and Purchase Contract

Clause 1
1. Y shall sell to X, and X shall purchase from Y, the Product in accordance
with the terms and conditions herein.
2. The delivery date shall be on 31 May 2019 and the delivery place shall be
the place in Tokyo designated by Y.
3. Y shall pay to X three hundred million Japanese Yen (\300,000,000) as
consideration of the Product in exchange for the delivery of the Product.

Clause 2
1. Y understands that the Product will be resold to consumers in Japan, and
thus, Y represents and warrants that the Product conforms to Japanese food
laws and regulations.
2. X shall make inspections, and Y shall be liable for any defects in the
Product, in accordance with Japanese Commercial Code Art. 526.

Clause 3 10
X and Y may terminate the Contract unilaterally and without any advance notice
to the other party when the other party becomes default under the Contract.