Lupofresh Ltd v Sapporo Breweries Ltd

Under the Rome Convention, an implied choice of law must be demonstrated with reasonable certainty. English drafting, CIF terms, assumptions about an English court, or a handshake do not suffice. In revised contracts of sale, characteristic performance remains the seller’s delivery of goods, even where the revision is economically adverse and replaces earlier agreements. Clear cancellation and replacement wording releases the seller from the earlier obligations. On the evidence of Japanese law, economic pressure in renegotiation did not constitute duress absent illegitimacy and special circumstances. A misrepresentation claim also required causation. The court declined to decide whether advance non-performance was independently tortious under the Japanese Civil Code.

Lupofresh, an English hop trader, entered into contracts with Sapporo for the supply of hop products. After supply difficulties, the parties replaced the 2007 and 2008 contracts on substantially less favourable terms. Sapporo sued for the unpaid price, while Lupofresh counterclaimed for damages and rescission based on duress, intimidation, misrepresentation and breach of the original contracts.

Bean J held that Japanese law governed the contracts and related claims, allowed Sapporo’s claim and dismissed the counterclaim: 2012 EWHC 2013. Lupofresh appealed. The central issues were the governing law, the effect of the replacement contracts, and whether the alleged pressure and representations gave rise to relief under Japanese law.

Appeal dismissed. Tomlinson LJ gave the judgment, with which Floyd LJ and Moses LJ agreed.

1. Governing law. Article 3(1) of the Rome Convention requires an implied choice of law to be demonstrated with reasonable certainty. The English language of the contracts, CIF UK port wording, regulatory references, later correspondence and a ceremonial handshake did not establish a shared choice of English law. The court distinguished choice of law from jurisdiction.
2. Closest connection. Under Article 4, the characteristic performance of the revised contracts remained Sapporo’s delivery of goods. It was not Lupofresh’s alleged surrender of rights. That analysis had to be based on the terms of the revised contracts, not on an economic comparison with the contracts they replaced. The vendor-place presumption therefore applied, and Japanese law governed.
3. Replacement contracts. The wording stating that the revised contracts cancelled, superseded and replaced the earlier contracts was clear. It released Sapporo from the earlier obligations. The question whether Japanese law recognised anticipatory breach was therefore beside the point, because Lupofresh had agreed to replacement contracts before the delivery dates.
4. Consent and duress. Article 8(2) concerned the existence, rather than the validity, of consent. The effect of duress on consent admittedly given was governed by the putative proper law under Article 8(1). On the evidence of Japanese law, a threat not to perform unless contractual terms were changed ordinarily remained within freedom of trade. Economic duress was not recognised on these facts, which lacked the special or exceptional circumstances, particularly targeted malice, required to make the pressure illegitimate.
5. Misrepresentation and tort. The misrepresentation claim failed for want of causation: Lupofresh would have accepted the revised terms even if it had known the true position. Under Article 709, contractual rights were protected interests, but the co-relationship approach required a sufficiently grave illegitimacy assessed against the importance of the right and the manner of infringement. The conduct did not meet that threshold. The court expressed no concluded view whether a pre-due-date refusal to perform could independently constitute an Article 709 infringement.
6. Other grounds. The court considered that, if necessary, delivery, payment and resale after the pressure had ceased would have amounted to deemed ratification under Articles 119–125. That was an alternative observation. Any alleged condition linking the 2007 variation to performance of the original 2008 contract was in any event superseded when the parties later agreed revised 2008 terms.

• Court of Appeal (Civil Division): Appeal from the judgment of Bean J in the Queen’s Bench Division, reported as 2012 EWHC 2013. Appeal dismissed.
• High Court of Justice, Queen’s Bench Division: Sapporo’s claim for the unpaid price succeeded and Lupofresh’s counterclaim failed.