Preface
Freedom of contract is an important legal principle. Giving effect to it involves determining whether the party’s reached agreement, and what it was they agreed to. It also involves filling in the gaps in their agreement and deciding what to do if they fail to carry it out. In all these matters, the policy of the law should be to give effect to what the parties intended or would have intended if they had considered the matter. As far as choice of law is concerned, this policy involves determining the system of law that they might have reasons anticipated to apply. The purpose of choice-of-law rules in this area should be to identify this system.
There is, still, another aspect of the law of contract. In some situations, the law is not concerned with discovering what the parties intended (or might have intended). Its purpose is to set aside their intention, it prohibits them from agreeing to certain terms or imposes certain terms on them. This is done either to affirm the weaker party or to give effect to some governmental policy. Consumer-protection rules are an illustration of the former; export vetoes espoused for foreign-policy reasons are an illustration of the latter. These are preferably called obligatory rules. Where they are in issue, it makes no sense to choose the applicable law on the criteria of the intention, factual or presumed, of the parties their intention isn’t applicable.
Lord Wright emphasized that in England a foremost principle” is that the proper law of the contract “is the law which the parties intended to apply.“ After reassuring the rule that the parties’ intent expressed in a choice of law clause is “conclusive,” he justified it by logic, Where the English rule that intention is the test that applies, and where there is an expressed statement by the parties of their intention to choose the law of the contract, it is delicate to see what qualifications are possible; ascertaining the intention expressed is bona fide and legal, and assuring there is no reason for avoiding the choice on the ground of public policy.
As to the contention that the choice in this case should be disregarded because the shipping contract had no connection with its proper law, the Council set up that “[c]connections with English law [are] not as a matter of principle necessary.”
Exceptions To Autonomy
“bona fide and legal” requirement would abate an express choice of law provision where the parties’ motive was to shirk the adverse consequences of a provision which would have else been part of the proper law of the contract. The courts may also disregard a choice of law clause where the choice is pointless.
Some law presently places no restrictions other than public policy upon the parties’ contractual choice of law, Japanese observant have proposed variable propositions to limit the use of choice of law clauses. The “qualitative restriction” proposition attempts to limit the parties’ choice of the proper law to the area of dispositive law so that the parties cannot shirk obligatory or imperative vittles’ of what would else be the proper law.
A review of this proposition, still, is that it denies party autonomy by presuming the actuality of a specific legal system to else govern the contract and determine which vittles’ are imperative or obligatory and which are dispositive.
US View on Party Autonomy
Utmost all agreements contain a choice of law clause setting out which jurisdiction’s law will govern construction and enforcement of the contract. This is especially important when the parties’ domicile or anticipate the contract to be performed (or assigned to someone) in multiple jurisdictions or have a civil practice because keeping up and complying with laws in all 50 state(s) can bring questions into a company’s business model and prospects.
“The Restatement (Second) of Conflicts of Laws S. 187” (1) states that the law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an unequivocal provision directed to that issue. Indeed, if the particular issue is one which the parties could not have resolved by an unequivocal provision in their agreement directed to that issue, the Restatement (Second) of Conflicts of Laws S. 187 (2) states that the law of the state chosen by the parties will govern unless either:
(a) The chosen state has no substantial relationship to the parties or the transaction(s) and there are no reasonable criteria for the parties’ choice, or
(b) applicability of the law of the chosen state would be contrary to a abecedarian policy of a state which has a materially higher interest than the chosen state in the determination of the particular issue and which, under “Restatement (Second) of Conflict of Laws Section 188” , would be the state of the applicable law in the absence of an effective choice of law by the parties.
Support for Autonomy
The parties’ express choice of the proper law is generally accepted worldwide, presumably because of its essential merits: certainty and pungency.
Given the underpinning principle of laissez faire, it would be hypocritical to grant parties the freedom to contract, yet deny them the stage to completely exercise that right by declaring them unskilful to elect the proper law which reflects their requirements and motives.
First, there is a recognition that countries other than the forum country and the country whose law is the proper law may have an interest in the resolution of the disagreement.
Problems
(a) First, in order to retain some degree of pungency, one would have to articulate the particular type of connection with the contract that would be sufficient to meet this demand.
(b) Second, indeed, if acceptable minimal connections norms could be delineated, they might unreasonably and unnecessarily limit the parties’ choice of the proper law
(c) Third, the proposition doesn.t fete that there may be legitim with credibility reasons for choosing a legal system unconnected to the contract.
(d) Fourth, it does not adequately protect against fugitive choices of law, because parties who evidently elect an unconnected proper law need only construct some connection between the chosen law and the contract to avoid the rule
The need that the selection of the governing law be “bona fide”-that is, a selection made without fugitive intent and taking a reasonable criterion for the selection -has gained adding acceptance worldwide since its commencement in England.
Ole Lando, a leading observant, advocates that it doesn’t give sufficient protection for the weaker party to an adhesion contract.
Rather, Lando advocates the relinquishment of a proposition that distinguishes between contracts where the parties are likely to be of unstable logrolling power and those where similar power is roughly equal. Where logrolling power is likely to be equal, for illustration in international commercial sales, leasing, agency and distribution contracts, he suggests that the parties’ choice should be presumed to be valid and determinative. This presumption could only be rebutted by proving that the choice was made mala fide-that the parties had “innocently impeachable or anomalous and unreasonable intentions.
For contracts where unstable logrolling power is likely to be involved, he suggests that the parties’ choice be confined to a set of presumed proper laws designed to fit the particular type of contract. The parties would, still, be permitted to diverge from the presumed proper law if the law elected has considerable connection with the contract, so that the protection that would have been swung under the presumed proper law will be assured.
References:
1. Limitations Applicable to the Autonomy of Choice by the Parties, The Restatement (Second) of Conflict of Laws
2. Law Governing in absence of choice of law by parties, The Restatement (Second) of Conflict of Laws
About the Author:-
This Article has been written by Aryan Sinha, 4th Year law (BBA+LLB(H) student at Galgotias University, Greater Noida.
