Sapporo Breweries Ltd v Lupofresh Ltd

Where parties have not made an express or sufficiently certain choice of law, the applicable contractual law is determined under the closest-connection rules. For a sale contract, the characteristic performance is ordinarily the seller’s obtaining and handing over of the goods, so the presumption generally points to the seller’s central administration.

Under Japanese law, economic pressure arising from a demand to vary a commercial contract did not give rise to rescission for duress on these facts. A tort claim for infringement of contractual rights also required illegitimacy, causation and damage. The defendant’s agreement to replacement contracts, despite exploitative bargaining conduct, did not meet that threshold. The misrepresentation claim failed for want of causation.

Sapporo supplied beer hops to Lupofresh under a series of forward purchase orders. Supply difficulties, increased market prices and pressure from the Chinese supplier led to revised contracts for the 2007 and 2008 crops. The revised terms provided for reduced quantities, substantially higher prices and additional transport and extraction costs for Lupofresh.

Lupofresh alleged economic duress, intimidation, misrepresentation and infringement of contractual rights. The court had to determine the governing law, whether the original contracts had been replaced, and whether the counterclaims succeeded under Japanese law.

1. Governing law. There was no choice of English law demonstrated with reasonable certainty under Article 3 of the Contracts (Applicable Law) Act 1990 and the Rome Convention of 1980. The use of English, CIF terminology, regulatory references, an English-law assumption in correspondence and a handshake in England did not establish such a choice.
2. Under Article 4, the characteristic performance of all the purchase orders, including the revised orders, was Sapporo’s obtaining and handing over the hops. The Article 4(2) presumption therefore applied, pointing to Japan as the place of Sapporo’s central administration. Japanese law governed the contracts.
3. Japanese law also governed the tort claims. Although the negotiations occurred principally in China and Japan, applying sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995, Japan had the substantially closer connection because it was the law governing the contracts.
4. Under Article 96 of the Japanese Civil Code, duress required an intention to cause fear and induce the transaction, illegitimate pressure, and a resulting manifestation of intention. Economic duress was generally not recognised in commercial renegotiation absent special circumstances. The revised purchase orders were valid and binding, and Lupofresh had no right to rescind them.
5. Article 709 required infringement of a right or legally protected interest, intention or negligence, causation, an illegitimate act and damage. The court rejected any requirement that illegitimacy must be criminal or malicious, but held that the exploitative renegotiation did not amount to the considerable or grave illegitimacy required to establish the tort.
6. The claim based on misrepresentation failed because Lupofresh had not proved that the alleged misrepresentations caused it to accept materially different terms. The counterclaim was dismissed.