The essential validity of a contract is governed by what he terms the "proper law of the contract," which he defines as the law, or laws, by which the parties to a contract intended, or may fairly be presumed to have intended, the contract to be govern ed. This may be the law of the place where the contract was made, or it may be the place of performance. But there are, he says, wide exceptions to this rule. The con tract must not be opposed to English inter ests, or the policy of English law, or to the moral rules upheld by English law. The contract must not be unlawful by the law of the country where it is made ; and its per formance must not be unlawful by the law of the country where it is to be performed; and it must not form part of a transaction which is unlawful by the law of the coun try where the transaction is to take place, though this probably does not apply to con tracts in violation of the revenue laws of a foreign country.
The interpretation of a contract and the rights and obligations under it of the par ties thereto, are to be determined by the "proper law of the contract." This law may be designated by the express words of the contract, the intention of the parties, which, in general, governs; or their intention may be inferred from the terms and nature of the contract, and from the general circumstances of the case. In the absence of counteracting considerations, the I proper law of the contract is, prima facie, presumed to be the law of the country where the contract is made; especially when the contract is to be performed there, or may be performed anywhere, but it may apply to a contract partly, or even wholly, to be performed in another country. Where the contract is to be performed wholly or partly in another country, the proper law of the contract, especially as to the mode of per formance, may be presumed. to be the law of the country where the performance is to take place. These presumptions are said to be grounded on the probable intention of the parties.
The validity of the discharge of a con tract (otherwise than by bankruptcy) de pends upon the proper law of the contract, that is, the law to which the parties, when contracting, intended to submit themselves. But this writer says there is a lack of decid ed authority on this point.
The same writer after saying that the reports and text books of authority reiterate the rule that a contract is governed by the law of the place where it is made, points out that when English courts first began to deal with the conflict of laws, they referred everything, except matters of procedure, to the lex loci contractus, by which they meant the law of the place where the contract was actually entered into. When they subse quently found it necessary to give effect to other laws than those of the place where the contract was made, and especially to the laws of the place of performance, the change of doctrine was combined with a verbal ad herence to an old formula not really consist ent with the new theory. They retained the
expression law loci contractus, but reinter preted it to mean the law of the country with a view to the law whereof the con tract was made. This might be the law of the country where the contract was made; or it might be the law of some other coun try, and was frequently the law of the coun try where the contract was to be performed. The same result was sometimes attained by another method of reasoning. It was laid down that a person must be assumed to have contracted at the place where his contract was to be performed. By either method of interpretation an actual reference to the law contemplated by the parties was masked under a nominal reference to ,the law of the place of the contract. This adherence to the term lean loci contractus has produced two effects. It has until recent years concealed from English lawyers the principle that the interpretation, as contrasted with the for mal validity, of a contract is governed by the law (of whatever country) contemplated by the parties, and that this law is constantly the law of the place of performance, and it has led English judges to give a preference to the lea; loci contractus, upon which the English courts fall back in doubtful cases. But English judges, as well as foreign and writers, both adopt the principle that the interpretation of a contract and the ob ligation arising under it are, in so far as they depend on the will of the parties, to be determined in accordance with the law con templated by the parties; Dicey, Conti. Laws 72d.
In the English courts it has finally been held that 'the "proper law of the contract" is the law or laws by which the parties to a contract intended, or may fairly be pre sumed to have intended, the contract to be governed; [1894] A. C. 202.
The phrase lea) loci contractus is used in a double sense, to mean, sometimes the law of a place where a contract is entered into; sometimes that of the place of its perform ance. And when it is employed to designate the law of the seat of the obligation, it is, on that account, confusing. The law we are in search of, which is to decide upon the nature, interpretation, and validity of the engagement in question, is that which the parties have either expressly or presump tively incorporated into their contract, as constituting their obligations; Pritchard v Norton, 106 U. S. 124, 1 Sup. Ct. 102, 27 L. Ed. 104. "In every forum a contract is gov erned by the law with a view to which it was made ;" Wayman v. Southard, 10 Wheat. (U. S.) 1, 6 L. Ed. 253.