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{{Short description|Aspect of law}}
{{Short description|Aspect of law}}
{{Unreferenced|date=December 2007}}
{{Conflict of laws}}
{{Conflict of laws}}
In the [[conflict of laws]], the validity and effect of a [[contract]] with one or more foreign law elements will be decided by reference to the so-called "[[proper law]]" of the contract.
In the [[conflict of laws]], the validity and effect of a [[contract]] with one or more foreign law elements will be decided by reference to the so-called "[[proper law]]" of the contract.


==History==
==History==
Until the middle of the 19th century, the [[court]]s applied the ''[[lex loci contractus]]'' or the ''law of the place where the contract was made'' to decide whether the given contract was valid. The apparent advantage of this approach was that the rule was easy to apply with certain and predictable outcomes. Unfortunately, it was also open to abuse, e.g. the place could be selected [[fraud]]ulently to validate an otherwise invalid contract; it might lead to the application of laws with no real connection with the transaction itself, say, because the parties signed the agreement while on holiday; or it might have been difficult to decide where the contract was made, e.g. because it was negotiated and signed on a railway journey through several [[Jurisdiction (area)|states]].
In England, until the middle of the 19th century, the [[court]]s generally applied the ''[[lex loci contractus]]'' as the proper law.<ref>[[J. H. C. Morris|J H C Morris]], The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 266.</ref><ref>This approach was also generally adopted in Scotland: [[Alexander Anton|A E Anton]], ''Private International Law: A treatise from the standpoint of Scots law'', (Scottish Universities Law Institute), W Green & Son, Edinburgh, 1967, reprinted 1970, p 185. As to contract in conflict of laws in Scotland generally, see further the rest of chapter 7 ("Contract").</ref>

To avoid these difficulties, some courts proposed applying the ''[[lex loci solutionis]]'' or the ''law of the place of performance of the contract''. This produced difficulties in cases where the contract required each party to perform its obligations in a different country, or where the place of performance was dictated by later circumstances. However, as the [[public policy (law)|public policies]] driven by the theory of [[freedom of contract]] evolved, the [[proper law|Doctrine of Proper Law]] emerged.


==Proper law==
==Proper law==
The ''proper law'' of the contract is the main system of law applied to decide the validity of most aspects to the contract including its formation, validity, interpretation, and performance. This does not deny the power of the parties to agree that different aspects of the contract shall be governed by different systems of law. But, in the absence of such express terms, the court will not divide the ''proper law'' unless there are unusually compelling circumstances. And note the general rule of the [[lex fori]] which applies the provisions of the ''proper law'' as it is when the contract is to be performed and not as it was when the contract was made.

The parties to a valid contract are bound to do what they have promised. So, to be consistent, the Doctrine of Proper Law examines the [[party (law)|parties']] intention as to which law is to govern the contract. The claimed advantage of this approach is that it satisfies more abstract considerations of [[justice]] if the parties are bound by the law they have chosen. But it raises the question of whether the test is to be subjective, i.e. the law actually intended by the parties, or objective, i.e. the law will [[imputation (law)|impute]] the intention which reasonable men in their position would probably have had. It cannot safely be assumed that the parties did actually consider which of the several possible laws might be applied when they were negotiating the contract. Hence, although the courts would prefer the subjective approach because this gives effect the parties' own wishes, the objective test has gained in importance. So the ''proper law'' test today is three-stage:
*it is the law intended by the parties when the contract was made which is usually evidenced by an express [[choice of law clause]]; or
*it is imputed by the court because either the parties incorporated actual legal terminology or provisions specific to one legal system, or because the contract would only be valid under one of the potentially relevant systems; or
*if there is no express or implied choice, it is the law which has the closest and most real connection to the bargain made by the parties.
It is only fair to admit that the task of imputing an intention to the parties in the third situation presents the courts with another opportunity for uncertainty and arbitrariness, but this overall approach is nevertheless felt to be the lesser of the available evils.

===Express selection===
===Express selection===
In England, as of 1 October 1983,<ref name=Morris1984preface>J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, p vii</ref> when the parties express a clear intention in a [[Choice of law clause|choice-of-law clause]], this is generally the ''proper law''.<ref>J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 270.</ref>
When the parties express a clear intention in a [[Choice of law clause|choice-of-law clause]], there is a rebuttable presumption that this is the ''proper law'' because it reflects the parties' freedom of contract and it produces certainty of outcome.{{citation needed|date=May 2017}} It can only be rebutted when the choice is not ''bona fide'', it produces illegality, or it breaches [[public policy doctrine|public policy]].{{citation needed|date=May 2017}} For example, the parties may have selected the particular law to evade the operation of otherwise mandatory provisions of the law which has the closest connection with the contract.{{citation needed|date=May 2017}} The parties are not free to put themselves above the law and, in such cases, it will be for the parties to prove that there is a valid reason for selecting that law other than evasion.{{citation needed|date=May 2017}}


===Implied selection===
===Implied selection===
When the parties have not used express words, their intention may be inferred from the terms and nature of the contract, and from the general circumstances of the case. For example, a term granting the courts of a particular state exclusive jurisdiction over the contract would imply that the ''lex fori'' is to be the ''proper law'' (see [[forum selection clause]]).
In England, as of 1 October 1983,<ref name=Morris1984preface/> when the parties have not used express words, their intention may be inferred from the terms and nature of the contract, and from the general circumstances of the case.<ref>J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 275.</ref>


===Closest and most real connection===
===Closest and most real connection===
In default, the court has to impute an intention by asking, as just and reasonable persons, which law the parties ought to, or would, have intended to nominate if they had thought about it when they were making the contract. In arriving at its decision, the court uses a list of connecting factors, i.e. facts which have an unambiguous geographical connection, and whichever law scores the most hits on a league table created from the list will be considered the ''proper law''. The current list of factors includes the following:
In ''Mount Albert Borough Council v Australasian etc Assurance Society Ltd'', it was held that, in default, the court has to impute an intention by asking, as just and reasonable persons, which law the parties ought to, or would, have intended to nominate if they had thought about it when they were making the contract.<ref>Mount Albert Borough Council v Australasian etc Assurance Society Ltd [1938] AC 224 at 240. J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 276.</ref> But see ''The Assunzione''.<ref>The Assunzione [1954] P 150 at 175. As to the effect this case, see J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 276, footnote 60.</ref>
*the [[habitual residence]]/[[domicile (law)|domicile]]/[[nationality]] of the parties;
*the parties' main places of business and of [[incorporation (business)|incorporation]];
*the place nominated for any [[arbitration]] proceedings in the event of a dispute (the ''[[lex loci arbitri]]'');
*the [[language]] in which the contract documents is written;
*the [[Text formatting|format]] of the documents, e.g. if a form is only found in one relevant country, this suggests that the parties intended the law of that country to be the proper law;
*the [[currency]] in which any payment is to be made;
*the [[flag]] of any ship involved;
*the place where the contract is made (which may not be obvious where negotiations were concluded by letter, fax or e-mail);
*the place(s) where performance is to occur;
*any pattern of dealing established in previous transactions involving the same parties; and
*where any [[insurance]] companies or relevant third parties are located.


===Dépeçage===
===Dépeçage===
Some legal systems provide that a contract may be governed by more than one law. This concept is referred to as [[dépeçage]]. Article 3(1) of the [[Rome Convention (contract)|Rome Convention on the law applicable to contractual obligations]] expressly recognises dépeçage in contracting states.
Some legal systems provide that a contract may be governed by more than one law. This concept is referred to as [[dépeçage]].<ref>J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 528.</ref>


==Problems==
==References==
{{reflist}}
There are many problems affecting this area of law, but two of the most interesting are:


==Further reading==
===Incapacity through age===
*Nikitas Hatzimihail. "Contracts" Preclassical Conflict of Laws. Cambridge University Press. 2021. Chapter 9.3.1. [https://books.google.co.uk/books?id=EM Page 285] et seq.
States approach the issue of [[intentionality]] from two related, but distinct, conceptual directions:
*Wolff, "Hong Kong's Conflict of Contract Laws: Quo Vadis?" (2010) 6 Journal of Private International Law 465
*[[legal liability|liability]] in which the law holds individuals responsible for the consequences of their [[action (philosophy)|actions]], and
*[[William Tetley|Tetley]] and Wilkins. International Conflict of Laws: Common, Civil, and Maritime. International Shipping Publications. 1994. Page 237. See also passim. [https://books.google.co.uk/books?id=zVgSAAAAYAAJ Google]
*exculpability in which fundamental social policies exclude or diminish the liability that actors would have incurred in different circumstances.
*Lectures on the Conflict of Laws and International Contracts. University of Michigan Law School. 1951. Passim. [https://books.google.com/books?id=TBCjAAAAMAAJ Google]
Many states have policies which protect the young and inexperienced by insulating them from liability even though they may have voluntarily committed themselves to unwise contracts. The age at which children achieve full contractual [[capacity (law)|capacity]] varies from state to state but the principle is always the same. [[Minor (law)|Infants]] are not bound by many otherwise valid contracts, and their intention is irrelevant because of the legal incapacity imposed on them by the state of the [[domicile (law)|domicile]] (the ''[[lex domicilii]]'') or [[nationality]] (the ''[[lex patriae]]''). This recognises a set of social values that requires exculpation even though there is relevant action and consent freely given.
*Petar Sarcevic (ed). International Contracts and Conflicts of Laws: A Collection of Essays. Graham & Trotman/Martinus Nijhoff. 1990. Passim. [https://books.google.com/books?id=ckJNAQAAIAAJ Google]

*[[Geoffrey Cheshire|Geoffrey Chevalier Cheshire]]. International Contracts. Jackson, Son & Company, printers to the University. Glasgow. 1948. Passim. [https://books.google.com/books?id=VMg4AQAAIAAJ Google]
Equally, states have an interest in protecting the normal flow of trade within their borders. If businesses had constantly to verify the nationality or domicile of their customers and their ages, this might slow down business and, potentially, infringe privacy legislation. Hence, conflicts of public policy can emerge which complicate the choice of law decision and invite [[forum shopping]], i.e. traders will always seek to sue infants with whom they have contracts in those states which accord priority to commercial interests, while children will seek the avoidance of liability in the courts which protect their interests. This would be achieved during the [[characterisation (conflict)|characterisation]] stage by classifying the issue as [[status (law)|status]] and its incidents rather than contract because a party's status and lack of capacity would be [[in rem]].
*Henri Battifol. Les Conflits des Lois en Matière des Contrats: Etude de droit international privé comparé. Recueil Sirey. Paris. 1938.

*Adrian Briggs. "Contracts". The Conflict of Laws. Second Edition. Oxford University Press. 2008. Chapter 5. [https://books.google.co.uk/books?id=47VGAgAAQBAJ&pg=PA153#v=onepage&q&f=false Page 153] et seq.
===Mistake, misrepresentation, etc.===
*Christopher M V Clarkson and Jonathan Hill. "Contractual obligations". The Conflict of Laws. Fourth Edition. Oxford University Press. 2011. Chapter 4. [https://books.google.co.uk/books?id=fWOcAQAAQBAJ&pg=PA203#v=onepage&q&f=false Page 203] et seq.
In many states, fundamental mistakes, misrepresentations and similar defects may make a contract void ''[[ab initio]]'', i.e. the defect is so serious that it prevents an agreement from ever coming into being. If this happens, every term in the contract including the express selection of the ''proper law'', would be unenforceable. This raises the question of whether the ''lex fori'' should operate a policy of saving the validity of contracts wherever possible. Suppose that a contract would be valid under many potentially relevant laws but not under the ''putative'' ''proper law'', and that, until problems arose, the parties have acted in [[good faith]] on the assumption that they will be bound by the agreement, some courts might be tempted to ignore the apparent ''proper law'' and choose another that would give effect to the parties general contractual intentions.
*[[J. H. C. Morris|J H C Morris]]. "Contracts" The Conflict of Laws. [https://books.google.co.uk/books?id=kFq_jWkV8DwC Second Edition]. Stevens and Sons. 1980. Chapter 13. Page 209 et seq.

*[[A. V. Dicey|Dicey]]. "Contracts: General Rules" and "Particular Contracts". A Digest of the Law of England with Reference to the Conflict of Laws. London. 1896. Chapters 24 and 25. [https://books.google.co.uk/books?id=2KcNAAAAYAAJ&pg=PA540#v=onepage&q&f=false Page 540] et seq.
==English law==
*[[Joseph Story]] and [[Isaac F. Redfield|Isaac F Redfield]]. "Foreign Contracts". Commentaries on the Conflict of Laws. Sixth Edition. Little, Brown and Company. 1865. [https://books.google.co.uk/books?id=mqYNAAAAYAAJ&pg=PA290#v=onepage&q&f=false Page 290] et seq.
In [[English law]], the Contracts (Applicable Law) Act 1990 formally incorporates the ''Convention on the Law Applicable to Contractual Obligations'' the "[[Rome Convention (contract)|Rome Convention]]") opened for signature in Rome on June 19, 1980, and signed by the [[United Kingdom]] on December 7, 1981; the ''Convention on the Accession of the Hellenic Republic to the Rome Convention'' (the "Luxembourg Convention") signed by the United Kingdom in Luxembourg on April 10, 1984; and the first ''Protocol on the Interpretation of the Rome Convention by the European Court'' (the "Brussels Protocol") signed by the United Kingdom in [[Brussels]] on December 19, 1988.


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[[Category:Conflict of laws]]
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[[Category:Contract law]]
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Latest revision as of 05:48, 30 January 2024

Conflict of laws and
private international law
Preliminaries
Definitional elements
Connecting factors
Substantive legal areas
Enforcement

In the conflict of laws, the validity and effect of a contract with one or more foreign law elements will be decided by reference to the so-called "proper law" of the contract.

History

In England, until the middle of the 19th century, the courts generally applied the lex loci contractus as the proper law.[1][2]

Proper law

Express selection

In England, as of 1 October 1983,[3] when the parties express a clear intention in a choice-of-law clause, this is generally the proper law.[4]

Implied selection

In England, as of 1 October 1983,[3] when the parties have not used express words, their intention may be inferred from the terms and nature of the contract, and from the general circumstances of the case.[5]

Closest and most real connection

In Mount Albert Borough Council v Australasian etc Assurance Society Ltd, it was held that, in default, the court has to impute an intention by asking, as just and reasonable persons, which law the parties ought to, or would, have intended to nominate if they had thought about it when they were making the contract.[6] But see The Assunzione.[7]

Dépeçage

Some legal systems provide that a contract may be governed by more than one law. This concept is referred to as dépeçage.[8]

References

  1. ^ J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 266.
  2. ^ This approach was also generally adopted in Scotland: A E Anton, Private International Law: A treatise from the standpoint of Scots law, (Scottish Universities Law Institute), W Green & Son, Edinburgh, 1967, reprinted 1970, p 185. As to contract in conflict of laws in Scotland generally, see further the rest of chapter 7 ("Contract").
  3. ^ a b J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, p vii
  4. ^ J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 270.
  5. ^ J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 275.
  6. ^ Mount Albert Borough Council v Australasian etc Assurance Society Ltd [1938] AC 224 at 240. J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 276.
  7. ^ The Assunzione [1954] P 150 at 175. As to the effect this case, see J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 276, footnote 60.
  8. ^ J H C Morris, The Conflict of Laws, Third Edition, Stevens and Sons, London, 1984, ISBN 0-420-46890-0, p 528.

Further reading

  • Nikitas Hatzimihail. "Contracts" Preclassical Conflict of Laws. Cambridge University Press. 2021. Chapter 9.3.1. Page 285 et seq.
  • Wolff, "Hong Kong's Conflict of Contract Laws: Quo Vadis?" (2010) 6 Journal of Private International Law 465
  • Tetley and Wilkins. International Conflict of Laws: Common, Civil, and Maritime. International Shipping Publications. 1994. Page 237. See also passim. Google
  • Lectures on the Conflict of Laws and International Contracts. University of Michigan Law School. 1951. Passim. Google
  • Petar Sarcevic (ed). International Contracts and Conflicts of Laws: A Collection of Essays. Graham & Trotman/Martinus Nijhoff. 1990. Passim. Google
  • Geoffrey Chevalier Cheshire. International Contracts. Jackson, Son & Company, printers to the University. Glasgow. 1948. Passim. Google
  • Henri Battifol. Les Conflits des Lois en Matière des Contrats: Etude de droit international privé comparé. Recueil Sirey. Paris. 1938.
  • Adrian Briggs. "Contracts". The Conflict of Laws. Second Edition. Oxford University Press. 2008. Chapter 5. Page 153 et seq.
  • Christopher M V Clarkson and Jonathan Hill. "Contractual obligations". The Conflict of Laws. Fourth Edition. Oxford University Press. 2011. Chapter 4. Page 203 et seq.
  • J H C Morris. "Contracts" The Conflict of Laws. Second Edition. Stevens and Sons. 1980. Chapter 13. Page 209 et seq.
  • Dicey. "Contracts: General Rules" and "Particular Contracts". A Digest of the Law of England with Reference to the Conflict of Laws. London. 1896. Chapters 24 and 25. Page 540 et seq.
  • Joseph Story and Isaac F Redfield. "Foreign Contracts". Commentaries on the Conflict of Laws. Sixth Edition. Little, Brown and Company. 1865. Page 290 et seq.
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