In the
conflict of laws
Conflict of laws (also called private international law) is the set of rules or laws a jurisdiction applies to a case, transaction, or other occurrence that has connections to more than one jurisdiction. This body of law deals with three broad ...
, the ''lex loci contractus'' is the
Latin
Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through the power ...
term for "law of the place where the contract is made".
[''Black's Law Dictionary'' abridged Sixth Edition (1991), p. 630.]
Explanation
When a case comes before a
court
A court is any person or institution, often as a government institution, with the authority to Adjudication, adjudicate legal disputes between Party (law), parties and carry out the administration of justice in Civil law (common law), civil, C ...
and all the main features of the case are local, the court will apply the ''
lex fori'', the prevailing
municipal law
Municipal law is the national, domestic, or internal law of a sovereign state and is defined in opposition to international law. Municipal law includes many levels of law: not only national law but also state, provincial, territorial, regional ...
, to decide the case. But if there are "foreign" elements to the case, the forum court may be obliged under the conflict of laws system to consider:
* whether the forum court has
jurisdiction
Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels.
Ju ...
to hear the case (see the problem of
forum shopping);
* it must then
characterise the issues, i.e. allocate the factual basis of the case to its relevant legal classes; and
* then apply the
choice of law rules to decide which law is to be applied to each class.
The ''lex loci contractus'' is one of the possible choice of law rules applied to cases testing the validity of a
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to ...
. For example, suppose that a person
domiciled in
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tota ...
and a person habitually resident in
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan ar ...
, make a contract by e-mail. They agree to meet in
New York State
New York, officially the State of New York, is a U.S. state, state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the List of U.S. ...
to record a
CD of
hip hop music. The possibly relevant choice of law rules would be:
* the ''
lex domicilii'' and law of habitual residence to determine whether the parties had the
capacity to enter into the contract;
* the ''lex loci contractus'' which could be difficult to establish since neither party left his own
jurisdiction
Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels.
Ju ...
(reliance on postal rules for
offer and acceptance in the several putative ''
leges causae'' might produce different results);
* the ''
lex loci solutionis'' might be the most relevant since New York is the most closely connected to the substance of the obligations assumed;
* the
proper law; and
* the ''lex fori'' which might have
public policy
Public policy is an institutionalized proposal or a decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs. Public ...
issues if, say, one of the parties was an
infant
An infant or baby is the very young offspring of human beings. ''Infant'' (from the Latin word ''infans'', meaning 'unable to speak' or 'speechless') is a formal or specialised synonym for the common term ''baby''. The terms may also be used t ...
.
Implications
The provisions of this legal concept can be construed to confirm the following:
* If a contract is valid where it was consummated, it is (generally) valid everywhere (i.e. in all
comity states);
* If a contract is void where it was consummated, it is void everywhere (i.e. in all comity states);
* An exception in comity exists: The agreement will not be held valid in the forum country if it violates the law of the forum country, or if it violates the law of nature, or if it violates the Law of God;
* A contract may be deemed valid in ''lex loci contractus'', but if it is a revenue law of that state it will not be enforced in the forum state.
If a contract is consummated in one state but its content specifies that it is to be carried out in another state, two ''loci'' are thus generated: ''locus celebrate contractus'' (where it was signed) and ''locus solutionis'' (where it is to be performed). The laws of the ''locus celebrate contractus'' state will govern all matters concerning the mode of constructing the contract, the meaning of each factor therein, the nature of the contract, and its validity. The laws of the ''locus solutionis'' state will apply to the performance or execution of the contract.
Determination at law
Sometimes, the ''locus contractus'' is difficult to determine, for example if the contract was signed at sea or on a moving train or if the details of the contract signing were not well documented. If a court is called upon to determine the applicable state, it may use any or all of the following factors:
* The residence or main domicile of the signatory parties;
* The main place of business of the signatory parties;
* The state in which the business was incorporated;
* The state nominated for arbitration proceedings in case of a conflict ''(
lex loci arbitri)'';
* The language used to write the contract;
* The format of the contract (only relevant if the contract format is unique to a state or group of states within the comity group);
* The currency in which payment for performance of the contract is specified to be paid;
* The nation of registration of any ship involved in performance of the contract;
* The state where completion of the contract is specified to occur ''(
lex loci solutionis)'';
* A pattern of similar contracts involving the same parties;
* The state where any third parties to the contract are located;
* The state where any insurance companies connected with the contract are located.
See also
* ''
Lex loci celebrationis''
* ''
Lex loci delicti commissi''
* ''
Lex loci rei sitae''
References
{{reflist
Conflict of laws
Latin legal terminology