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  • Louisiana Law ReviewVolume 47 | Number 5Student Symposium: Conflict of Laws in LouisianaMay 1987

    Conflict of Laws - ContractsDana Patrick Karam

    This Article is brought to you for free and open access by the Law Reviews and Journals at DigitalCommons @ LSU Law Center. It has been acceptedfor inclusion in Louisiana Law Review by an authorized administrator of DigitalCommons @ LSU Law Center. For more information, please contactsarah.buras@law.lsu.edu.

    Repository CitationDana Patrick Karam, Conflict of Laws - Contracts, 47 La. L. Rev. (1987)Available at: http://digitalcommons.law.lsu.edu/lalrev/vol47/iss5/13

  • CONFLICT OF LAWS-CONTRACTS

    INTRODUCTION

    Since 1825, Louisiana Civil Code article 10 has provided Louisianacourts with the starting point for deciding conflict of laws issues incases involving contract disputes. The pertinent rules of that articleare found in the first two paragraphs, which state:

    The form and effect of public and private written instrumentsare governed by the laws and usages of the places where theyare passed or executed.

    But the effect of acts passed in one country to have effectin another country, is regulated by the laws of the countrywhere such acts are to have effect.'I

    Historically, Louisiana courts have interpreted these codal provi-sions as authorizing the application of traditional conflicts rules suchas lex contractus and lex solutionis. 2 Although such traditional rules

    Copyright 1987, by LOUISIANA LAW REVIEW.1. La. Civ. Code art. 10.2. For typical examples of traditional choice of law rules, see Restatement of

    Conflict of Laws (1934). The general rules established in that first Restatement forcontract cases were that "[t]he law of the place of contracting determines the validityand effect of a promise" (the lex loci contractus rule), but that the law of the placeof performance governs questions of performance, including breach or excuse for non-performance (the lex solutionis rule). Restatement of Conflict of Laws 332, 358(1934). See also id. 311 (defining "place of contracting"). See generally 2 J. Beale,A Treatise on the Conflict of Laws 332 (1935); Beale, What Law Governs the Validityof a Contract, 23 Harv. L. Rev. 260 (1909). See text accompanying infra notes 105-108 for criticism of the lex contractus rule (as applied to capacity).

    This traditional approach has been followed by state courts and by federal courtssitting in Louisiana. State Court Decisions: E.g., Theye Y Ajuria v. Pan Am. Life Ins.Co., 245 La. 755, 762, 161 So. 2d 70, 72 (1964); General Talking Pictures Corp. v.Pine Tree Amusement Co., 180 La. 529, 531, 156 So. 812, 813 (1934); Stark v. Marsh,314 So. 2d 465, 467 (La. App. 4th Cir. 1975); United States Leasing Corp. v. Keiler,290 So. 2d 427, 430 (La. App. 4th Cir. 1974); Bologna Bros. v. Morrissey, 154 So.2d 455, 459 (La. App. 2d Cir. 1963); Delta Equip. & Constr. Co. v. Cook, 142 So.2d 427, 430 (La. App. 1st Cir. 1962). Federal Court Decisions: E.g., Ducre v. MineSafety Appliances, 573 F. Supp. 388, 393 (E.D. La. 1983), aff'd in part, rev'd in parton other grounds, sub nom. Ducre v. Executive Officers of Halter Marine, Inc., 752F.2d 976 (5th Cir. 1985); Porter v. American Optical Corp., 641 F.2d 1128, 1144 (5thCir. 1981); Sprow v. Hartford Ins. Co., 594 F.2d 418, 421 (5th Cir. 1979); Franklinv. Texas Int'l Petroleum Corp., 324 F. Supp. 808, 812 (W.D. La. 1971); Modern Farm

  • 1182 LOUISIANA LA W REVIEW [Vol. 47

    once dominated American conflicts law, they gradually fell into disfavorfollowing the advent of modern conflict methodologies.3 Following thistrend, the Louisiana Supreme Court, in Jagers v. Royal IndemnityCo.,4 abandoned the traditional conflicts theory for torts cases in favorof a more modern approach which contains aspects of both the gov-ernmental interest analysis developed by Professor Brainard Currie5

    and the "significant relationship" approach of the Restatement (Sec-ond) of Conflict of Laws. 6 In Jagers, however, the court was not

    Serv., Inc. v. Ben Pearson, Inc., 308 F.2d 18 (5th Cir. 1962). Cf. Superior Oil Co. v.Transco Energy Co., 616 F. Supp. 98, 106 (W.D. La. 1985) (alternate basis for holding).See generally Comment, Conflict of Laws: Contracts and Other Obligations, 35 La. L.Rev. 112 (1974). For a more complete analysis of the traditional approach to contractcases by Louisiana courts prior to 1964, see Comment, Conflict of Laws in Louisiana:Contract, 38 Tul. L. Rev. 726 (1964).

    3. See infra notes 5 and 6.4. 276 So. 2d 309 (La. 1973), discussed in the Torts section of this Symposium,

    supra text accompanying notes 70-75.5. See Currie, Notes on Methods and Objectives in the Conflict of Laws, 1959

    Duke L.J. 171, 178, reprinted in B. Currie, Selected Essays on the Conflict of Laws177, 183-84 (1963). In brief, this methodology may be summarized as follows. Allrelevant transactional contacts with all jurisdictions are examined in order to determinewhether a state has a legitimate interest in the application of its law to a particularissue. The potentially applicable laws of each state are examined and interpreted inorder to identify their underlying purposes and policies. Then, considering the particularfacts and circumstances of the case, the court determines whether the application of astate's law will advance that state's policies. If so, that state has an interest in theparticular issue. If only one state has an interest in the application of its law, a "falseconflict" exists, and the law of that state is applied. If, on the other hand, more thanone state has an interest in applying its own law, a "true conflict" exists, and the lawof the interested forum state controls. The latter component of Professor Currie'smethod, i.e., that a state should apply its own law whenever faced with a true conflict,has been rejected by other commentators who would weigh the competing state interestsinvolved in a true conflict instead of automatically applying the law of the forum. See,e.g., Sedler, The Governmental Interest Approach to Choice of Law: An Analysis anda Reformulation, 25 UCLA L. Rev. 181, 221-22 (1977); Baxter, Choice of Law andthe Federal System, 16 Stan. L. Rev. 1, 1-19 (1963). For a critique of the interestanalysis method, see Symeonides, Revolution and Counter-Revolution in American Con-flicts Law: Is There a Middle Ground?, 46 Ohio St. L.J. 549 (1985).

    6. The Restatement (Second) utilizes a flexible weighing process to choose the lawof the state that has the most significant relationship with a particular issue in a choiceof law case. Generally, the determination of the state having the most significantrelationship to a particular issue is based on certain factors contained in 6: (a) theneeds of the interstate and international systems, (b) the relevant policies of the forum,(c) the relevant policies of other interested states in the determination of the particularissue, (d) the protection of justified expectations, (e) the basic policies underlying theparticular field of law, (f) the certainty, predictability and uniformity of result, and(g) the ease in the determination and application of the law to be applied. Restatement(Second) of Conflict of Laws 6(2) (1971) [hereinafter Restatement (Second)]. This list

  • 19871 CONFLICTS SYMPOSIUM 1183

    restricted by Louisiana Civil Code article 10, since that article doesnot address conflict of laws issues arising in tort cases, as it does forcontract cases. Thus, although some cases tend to ignore article 10, 7

    utilization in contract cases of the process by which the traditionalconflicts rules were rejected in Jagers is inappropriate. Any applicationby a Louisiana court of modern choice of law methodologies in contractcases must begin with consideration of, and find support in, article10.8

    This article will first examine the foundations for and limitationson the party autonomy rule in Louisiana. That discussion will befollowed by an examination of the Louisiana approach to choosingthe applicable law in the absence of an effective contractual choice.

    I. PARTY AUTONOMY

    A. Legislative Foundations

    It is not uncommon for contracting parties to stipulate that thelaw of a particular state shall control the rights and obligations arisingunder the contract. When such a stipulation is made, Louisiana courts

    is not exclusive. Id. at 6 comment c.Regarding contracts, the Restatement (Second) specifically rejected the traditional

    rules, such as the law of the place of making and the law of the place of performance,that had been adopted by the 1934 Restatement. See Restatement (Second), supra, ch.8, introductory note. Instead of using specific rules, the Restatement (Second) directsthat the controlling law should be that of the state with the "most significant rela-tionship" based on 6's general principles. Id. 188(1). In applying 6 and in theabsence of an effective contractual choice of law by the parties (discussed in textaccompanying infra notes 9-61), the following contacts should be considered: (a) theplace of contracting, (b) the place of negotiation of the contract, (c) the place ofperformance, (d) the location of the subject matter of the contract, and (e) the domicile,residence, nationality, place of incorporation and place of business of the parties. Thesecontacts are to be evaluated according to their relative importance with respect to theparticular issue. Id. 188(2).

    7. E.g., Lee v. Hunt, 631 F.2d 1171, 1176 (5th Cir. 1980); Silver v. Nelson, 610F. Supp. 505, 513, 523 (E.D. La. 1985); Business Air Center, Inc. v. Puritan Ins. Co.,593 F. Supp. 1048, 1050 (W.D. La. 1984); Santamauro v. Taito do Brasil Industria EComercia Ltda., 587 F. Supp. 1312, 1315 (E.D. La. 1984); Succession of Dunham, 393So. 2d 438, 444 (La. App. 1st Cir. 1980), aff'd in part, rev'd in part on other grounds