Print Concept GmbH v G.E.W. (EC) Limited

Under Article 4(2) of the Rome Convention, the characteristic performance of a contract must be identified from the agreement’s actual obligations. In a bilateral contract, payment is ordinarily not characteristic. The performance for which payment is due will usually supply the relevant connecting factor.

An exclusive distributorship must be assessed as a whole. Where its essential contemplated operation is the manufacturer’s supply and the distributor’s purchase and resale of goods, the manufacturer’s supply may be characteristic even though the distributor is under a best-endeavours obligation to develop the market. The Article 4(2) presumption then points to the law of the manufacturer’s principal place of business.

Print Concept, a German company, was GEW’s exclusive distributor of air-cooled drying systems in Germany, Austria and Switzerland under an informal oral agreement made in 1995. GEW manufactured the systems in England. After the agreement ended, the governing law mattered because Print Concept claimed that German law would entitle it to an indemnity which English law would not provide.

David Steel J, deciding preliminary issues in the Commercial Court, held that English law governed the distributorship. Print Concept appealed. It contended that its implied obligation to use best endeavours to promote GEW’s products was the characteristic performance under Article 4 of the Rome Convention. GEW contended that the agreement’s substance was the supply and purchase of the systems.

1. Appeal dismissed unanimously. Longmore LJ gave the reasoned judgment, with whom Tuckey LJ and Sir Christopher Slade agreed. The distributorship was governed by English law.

2. The court first identified the agreement’s terms. It accepted an implied obligation on Print Concept to use best endeavours to promote sales in its territories. It also held that there was a reciprocal implied term: when reasonably required, GEW would supply and Print Concept would purchase the products at the current list price or another agreed price. The obligations were implied rather than express, but their reciprocal nature was material.

3. Under Article 4(2) of the Rome Convention, the relevant inquiry was which party was to effect the performance characteristic of the contract. The court rejected an approach which isolated the distributor’s market-development obligation. The agreement had to be assessed globally.

4. The essential feature of this distributorship was the contemplated supply, purchase and resale of GEW’s made-to-order systems. Market penetration depended on that supply. GEW’s supply obligation, often including specification and installation assistance, was therefore the characteristic performance. GEW carried on business in England, so the Article 4(2) presumption selected English law.

5. The later tripartite delivery and purchase agreement could not itself determine the governing law of the earlier oral agreement. However, the intended implementation of the distributorship through sales and purchases was part of the earlier agreement’s own economic substance. Article 4(5) did not need to be considered because characteristic performance could be determined. In any event, the court would have held that the agreement was most closely connected with England under Article 4(1).

• Court of Appeal (Civil Division): dismissed Print Concept’s appeal and affirmed that English law governed the distributorship: [2001] EWCA Civ 352.
• High Court, Queen’s Bench Division, Commercial Court: David Steel J determined preliminary issues and held that English law governed the oral distribution agreement.