ABSTRACT

At common law, judges were confronted from the end of the 18th century with questions as to which law was to govern contractual disputes that involved a foreign element. To be more precise, the question was not ‘which law is to govern the contract?’ but ‘which law is to govern the particular contractual issue that is before the court?’. It would have been possible to select the lex loci contractus,10 but that could have been fraudulently chosen or it might have little connection with the substance of the contract and the precise locus might be difficult to determine until the contract had been concluded. The lex loci solutionis might be attractive, but it can cause difficulties if the contract is bilateral and each party has to perform in a different country. English law endeavoured to avoid rigid criteria and sought flexibility. The general approach was explained by Lord Wright in Mount Albert Borough Council v Australasian Temperance and General Assurance Society:11

From the middle of the 19th century, English judges began to seek the proper law of the contract as the law to govern most of the questions arising under a contract containing a foreign element. In many cases, there would be an express choice of law but, in other cases, the choice of law would have to be inferred. In broad terms, this flexible approach grounded in the real or presumed intentions of the parties was consistent with the laissez faire traditions of the age. The case law that began to develop after the middle of the 19th century concerned three possible approaches, namely, (a) where there had been an express choice of law; (b) where the court could infer an implied choice of law; and (c) those situations where the court would select the proper law based on the closest and most real connection with the transaction. It is proposed to examine each of these situations in turn.