The lex loci contractus is the Latin term for "law of the place where the contract is made" in the Conflict of Laws. Starr Printing Co. v. Air Jamaica, 45 F.Supp.2d. 625 (1999 U.S. Dist.). Conflict is the branch of public law regulating all lawsuits involving a "foreign" law element where a difference in result will occur depending on which laws are applied.
When a case comes before a court
and all the main features of the case are local, the court will apply the lex fori
, the prevailing municipal law
, 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 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. For example, suppose that a person domiciled in Canada and a person habitually resident in France, make a contract by e-mail. They agree to meet in New York State 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 their own states (reliance on postal rules for offer and acceptance in the several putative lex 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 issues if, say, one of the parties was an infant.