1 Receivables Contracts

1.1 Formalities. In order to create an enforceable debt obligation of the obligor to the seller: (a) is it necessary that the sales of goods or services are evidenced by a formal receivables contract; (b) are invoices alone sufficient; and (c) can a binding contract arise as a result of the behaviour of the parties?

In order to create an enforceable debt obligation of the obligor to the seller:

  1. it is not necessary that the sale of goods or services is evidenced by a formal receivables contract. An enforceable debt obligation may be created orally or in writing;
  2. an invoice alone may operate as sufficient evidence of an enforceable debt obligation; and
  3. the behaviour of parties may be used to determine the existence of a contract implied on the basis of dealings between parties.

1.2 Consumer Protections. Do your jurisdiction's laws: (a) limit rates of interest on consumer credit, loans or other kinds of receivables; (b) provide a statutory right to interest on late payments; (c) permit consumers to cancel receivables for a specified period of time; or (d) provide other noteworthy rights to consumers with respect to receivables owing by them?

The Consumer Credit Act 1995 (as amended) (the "CCA"), the European Communities (Consumer Credit Agreements) Regulations 2010 (as amended) (the "CCA Regulations", together with the CCA, the "CCA Rules") and The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (which came into operation in Ireland on 21 March 2016) regulate consumer credit agreements in Ireland.

The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 apply to new: (i) credit agreements secured by a charge, a mortgage or by another comparable security used in an EEA Member State on residential immovable property or secured by a right related to residential immovable property, and where the person to whom the credit is provided is a consumer; and (ii) credit agreements, the purpose of which is to acquire or retain property rights in land or in an existing or projected building, and where the person to whom the credit is provided is a consumer, entered into on or after 21 March 2016 and should be taken into account in considering what consumer protections are available to consumers in Ireland.

The CCA rules do not limit rates of interest on consumer credit, loans or other kinds of receivables. However, it is noteworthy that if the cost of credit is considered excessive, it may not be enforceable. A "credit institution" (as defined under the CCA) is required to notify the Central Bank of Ireland (the "CBI") of any increase in its charges to consumers. The CBI has the power to instruct the credit institution to refrain from imposing the increase in charges.

In Ireland, there is no statutory right to interest on late payments in consumer transactions. In commercial transactions, a statutory right to interest on late payments does exist.

Consumers may cancel receivables if the consumer credit agreement the receivables were purchased under does not comply with the CCA Rules. In addition, under The European Union (Consumer Mortgage Credit Agreements) Regulations 2016, a consumer has a right to discharge fully or partially their obligations under a credit agreement prior to the expiry of that agreement and is entitled to a reduction in the total cost of the credit to the consumer (such reduction consisting of the interest and the costs for the remaining duration of the contract). Furthermore, under The European Union (Consumer Mortgage Credit Agreements) Regulations 2016, a consumer may be entitled to compensation where justified for possible costs directly linked to the early repayment.

Other noteworthy rights of consumers include:

  1. Rights against unfair contractual clauses - the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (the "UTCC").
  2. Protections in dealing with regulated entities - the Consumer Protection Code of the CBI.
  3. Protections against unfair commercial practices - the Consumer Protection Act 2007.

During 2020, the Irish government and other stakeholders responded to the COVID-19 pandemic with a series of measures designed to reduce the impact of COVID-19 on the Irish economy. In respect of consumer loans, this resulted in the CBI obtaining agreement from relevant financial institutions in the Irish market that offered payment breaks and enforcement moratoria on various loan products, initially on a general basis and latterly on a case-by-case basis.

1.3 Government Receivables. Where the receivables contract has been entered into with the government or a government agency, are there different requirements and laws that apply to the sale or collection of those receivables?

As with all governments and government agencies worldwide, there is a possibility that sovereign immunity may affect the enforceability of receivables contracts in Ireland.

Irish governmental bodies and agencies are subject to the Prompt Payment of Accounts Act 1997. Under the Prompt Payments of Accounts Act 1997, Irish governmental bodies and agencies have a statutory obligation to pay monies due to their suppliers within 45 days of receipt of an invoice or delivery of the goods or services.

2 Choice of Law - Receivables Contracts

2.1 No Law Specified. If the seller and the obligor do not specify a choice of law in their receivables contract, what are the main principles in your jurisdiction that will determine the governing law of the contract?

Receivables contracts entered into on or after 17 December 2009 (contracts entered into prior to 17 December 2009 are governed by the Contractual Obligations (Applicable Law) Act 1991, pursuant to which the Rome convention on the law applicable to contractual obligations (the "Rome Convention") was implemented in Ireland) are governed by Regulation (EC) 593/2008 of 17 June 2008 ("Rome I").

Rome I contains specific provisions regarding certain classes of contract, which determine the applicable law in the absence of an express choice of law in such contracts. In respect of contracts that do not clearly fall within the scope of any of these specific provisions (receivables contracts are not specifically provided for), the applicable law is determined by reference to the jurisdiction where the party required to effect the characteristic performance of the contract has his habitual residence.

If the applicable law cannot be determined by reference to the foregoing, the contract shall be governed by the law of the country with which it is most closely connected.

Notwithstanding the above considerations, Rome I provides that if the circumstances of the case are such that the contract is manifestly more closely connected to another country other than that determined in accordance with the above, then the laws of that other country shall apply.

The applicable law of contracts that fall outside the remit of Rome I will be determined by reference to the parties' intentions under the principles of Irish common law. If such intentions cannot be established, the applicable law will be the law with which the contract is most closely connected. A part of a contract may be separable, in order to render such part governable by the law of another country with which it has a closer connection.

2.2 Base Case. If the seller and the obligor are both resident in your jurisdiction, and the transactions giving rise to the receivables and the payment of the receivables take place in your jurisdiction, and the seller and the obligor choose the law of your jurisdiction to govern the receivables contract, is there any reason why a court in your jurisdiction would not give effect to their choice of law?

In the absence of overriding mandatory provisions of law applying, Irish courts should give effect to such a choice of law.

2.3 Freedom to Choose Foreign Law of Non-Resident Seller or Obligor. If the seller is resident in your jurisdiction but the obligor is not, or if the obligor is resident in your jurisdiction but the seller is not, and the seller and the obligor choose the foreign law of the obligor/seller to govern their receivables contract, will a court in your jurisdiction give effect to the choice of foreign law? Are there any limitations to the recognition of foreign law (such as public policy or mandatory principles of law) that would typically apply in commercial relationships such as that between the seller and the obligor under the receivables contract?

As discussed above, under Rome I, the parties to a contract may freely choose the applicable law of their contract. Such choice would usually only be overridden if it was contrary to public policy or certain overriding mandatory provisions of law. The principles of Irish common law apply to contracts outside the scope of Rome I. Nonetheless, such principles will generally recognise the parties' right to choose the governing law of their contract and would only seek to displace such choice in exceptional circumstances.

3 Choice of Law - Receivables Purchase Agreement

3.1 Base Case. Does your jurisdiction's law generally require the sale of receivables to be governed by the same law as the law governing the receivables themselves? If so, does that general rule apply irrespective of which law governs the receivables (i.e., your jurisdiction's laws or foreign laws)?

Subject to certain exceptions, no. Irrespective of the law governing the receivable(s) the parties to the receivable(s) sale/ purchase agreement are permitted to select the law of any country to govern the agreement. Typically, however, the parties will select the law governing the majority of the receivables as the law to govern the sale/purchase agreement. Transactions involving the sale/purchase of receivables governed by various different laws can comprise a single receivables sale/purchase agreement with a split governing law clause or multiple receivables sale/purchase agreements.

3.2 Example 1: If (a) the seller and the obligor are located in your jurisdiction, (b) the receivable is governed by the law of your jurisdiction, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of your jurisdiction to govern the receivables purchase agreement, and (e) the sale complies with the requirements of your jurisdiction, will a court in your jurisdiction recognise that sale as being effective against the seller, the obligor and other third parties (such as creditors or insolvency administrators of the seller and the obligor)?

Yes, the Irish courts should recognise such a sale as being effective.

3.3 Example 2: Assuming that the facts are the same as Example 1, but either the obligor or the purchaser or both are located outside your jurisdiction, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller), or must the foreign law requirements of the obligor's country or the purchaser's country (or both) be taken into account?

Section 2, and questions 3.1 and 3.4 are applicable here. Additionally, under Rome I and the Rome Convention, laws other than the governing law of the receivables sale/purchase agreement may be taken into account in certain circumstances. An example of this is where an Irish law-governed contract will be performed in a place other than Ireland; in such circumstances, the Irish courts may apply certain provisions of the law of the country where performance is to take place (where non-application of such provisions would render the contract unlawful in that country).

To view the full article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.