Post‐Formation Choice Of Law In Contract

Publication Date01 Mar 1987
DOIhttp://doi.org/10.1111/j.1468-2230.1987.tb02571.x
AuthorDavid G. Pierce
POST-FORMATION
CHOICE
OF
LAW
IN
CONTRACT
“As
a matter
of
legal logic,
I
find insuperable difficulty in
seeing b what system
of
law you are to decide what, if any, is
already in existence with no proper law, but, instead, with a
‘floating’ non-law.”
The
Armar,
per
Megaw
L.J.’
IT
is almost conventional to commence a discussion
of
English
choice
of
law rules in contract by describing them as “well settled.”’
One
of the few unsettled points is whether the governing law
of
a
contract can change after that contract has been concluded. The
question has been dealt with by courts and theorists in several civil
law c~untries,~ is addressed in the European Convention on the
Law Governing Contractual
obligation^,^
and has occasionally
been raised by English conflicts scholars.’ But until quite recently,
the issues raised by a purported change in governing law after
formation
of
a contract had not been confronted by the English
courts and they had accordingly pronounced no definite views.
In at least three recent cases,6 however, the English courts have
encountered contracts which by accident
or
by design purported to
allow the governing law to be changed by reference to the
occurrence of an event (including the exercise
of
a choice by one
of
the parties) at some point after the contract had been concluded.
In
these cases, which deserve more attention than they have to
date received, the English courts have regarded the whole idea
of
post-formation choice of law in contract with much greater suspicion
than their American and Continental counterparts. Yet, as shall be
argued, this fits uneasily with their long respect for party autonomy
the lega
T
effect
of
an event which occurs when a contract is
Armar Shipping Co. Ltd.
v.
Caisse Algerienne &Assurance et de Reassurance, The
Armar
(19811
1
W.L.R. 207 (C.A.),
215.
See,
e.g. Koninklijke Zwavelzuurfabrieken VIH Kerjen N.V.
v.
D.
A.
&
D.
D.
Psychoyos, The Metamorphosis
[I9531
1
W.L.R. 543, 547
per
Karminski
J.
See also
Libling, “Formation
of
Internationat Contracts” (1979) 42 M.L.R. 169, and Thomson,
“A
Different Approach to Choice of Law in Contract” (1980) 43 M.L.R. 650. But
Ehrenzweig perhaps more accurately observed: “Virtually every judge, lawyer, and law
teacher who deals with conflicts questions involving contracts now prefaces his analysis
with
a
confession and an apology
to
the effect that such questions concern ‘the most
confused subject in the conflict of laws’.” “Contracts in the Conflict of Law” 59
Colum.L.Rev. 973 (1959). See also Morris,
The Conflict
of
Laws
(3rd ed.. 1984) 265,
Cheshire
&
North’s Private International Law
(10th ed., 1979) 196.
See, generally, Lando, “Private International Law: Contracts”
3
International
Encyclopedia
of
Comparative Law,
Chap. 24 (1976), at secs. 100-103, and the authorities
discussed therein.
Article 3(2), Convention on the Law Applicable to Contractual Obligations (Opened
for signature June 19, 1980). [I9801
O.J.
(282.
See,
e.g.
Wolff,
Private International Law
(2nd ed., 1950) at 426; Kahn-Freund
General Problems
of
Private International Law
(1976) at 256-257.
The Armar, supra
note 1;
Astro Venturoso Compania Naviera
v.
Hellenic Shipyards
S.A.,
The Mariannina
(39833
1
Lloyd’s Rep.
12
(C.A.);
Dubai Elecfricify Co.
v.
Islamic
Republic
of
Iran Shipping Lines, The Iran Vojdan
[
19841 2 Lloyd’s Rep. 380.
176
MAR.
19871
POST-FORMATION
CHOICE
OF
LAW
IN
CONTRACT
177
and for practical rather than conceptualist solutions to conflicts
problems.
I.
THE
RESPECT
FOR
PARTY
AUTONOMY
Before looking at the cases, it may be useful to retrace some
familiar ground. The conflict of laws rules of most of the world’s
legal systems now accept to some degree at least a choice
of
law by
the parties to a contract as an important factor connecting the
transaction with a body
of
substantive law.’ But it is England
which is widely regarded as the ancestral home
of
party autonomy
and
“[nlo
principle
of
English private international law has been
expressed
so
often” as that which holds the parties to a contract
free to choose the law which will govern their rights and duties
thereunder.8 The starting point is Lord Mansfield’s famous judgment
in
Robinson
v.
Bland9
and, since at least 1865,’’ English law has
“refused to treat as conclusive, rigid or arbitrary criteria such as
lex
loci contractus
or
lex
loci solutionis,
and has treated the matter
as
depending
on
the intention of the parties, to be ascertained in each
case on a consideration
of
the terms of the contract, the situation
of
the parties, and generally on all the surrounding facts.””
Even in the absence
of
an express choice of law in the contract
itself, the English courts defer to the will
of
the parties through the
notion
of
implied intention. After a period
of
some uncertainty
about this,12 the House
of
Lords has recently and rather decisively
directed that a search be made for the implied choice
of
law before
proceeding to apply the law having the closest and most real
connection with the contract.
As
Lord Diplock put it:
“If it is apparent from the terms of the contract itself that the
parties intended it to be interpreted by reference
to
a particular
Lando,
supra
note
3,
at
secs.25-60.
See, generally, Yntema, “‘Autonomy’ in Choice
of
Law”
1
Am.J.Comp.L.
341 (1952).
See also Rabel
The Conflict
of
Laws: A
Comparative Study
(2nd ed., Drobnig
1960) 371
el seq.
But party autonomy has not been
so
fully accepted in the United States, see
infra
note
77,
and the law
of
the forum
prevails over the parties’ choice in Austria and in Latin America. See, generally,
Seidl-Hohenveldern,
American-Austrian Private International Law
(1963) 31-33;
and
Goldschmidt
&
Rodriguez-Novas,
American-Argentine Private International Law
(1966)
47-55.
Wolff,
supra
note
5,
at
418419.
Nussbaum, among others, has suggested that the
founding father
of
the theory
of
party autonomy is the sixteenth-century French jurist
Molinaeus: “Conflict Theories of Contract”
51
Yale
L.J.
893, 895 (1942).
Others claim
the Frenchman Dumoulin
or
the Dutch scholar Huber. See Yntema,
supra
note
7.
But
among courts it seems the English were first to apply the theory on a consistent basis.
Lando,
supra
note
3,
at sec.
28.
lo
The year in which the law
of
the place of contracting was abandoned in the leading
cases
P.
&
0.
Steam Navigation Company
v.
Shand
(1865)
3
Moo.P.C.(N.S.)
272
and
Llo d
v.
Guibert
(1865)
L.R.
1
Q.B.
115
(Exch. Chamber).
Assurance Society Lfd.
[1938]
A.C.
224. 240
(P.C.),
per
Lord Wright.
l2
Arising out
of
the definition
of
the proper law of the contract given by Lord
Simonds in
Bonython
v.
Commonwealth
of
Australia
[1951]
A.C.
201, 219:
“[Tjhe system
of
law by reference to which the contract was made
or
that with which the transaction
has its closest and most real connection” (emphasis added).
(1760)
2
Burr.
1077.
Y
Mount Albert Borough Council
v.
Australasian Temperance and General Mutual Life

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