A re-examination of the conflict rules governing the validity of international contracts

• Jurisdiction: South Africa
• Pages: 41-59
• Citation: (2020) 7(2) Journal of Comparative Law in Africa 41
• Date: 01 April 2021
• DOI: https://doi.org/10.47348/JCLA/v7/i2a2
• Author: Obiri-Korang, P.
• Published date: 01 April 2021

https://doi.org/10.47348/JCLA/v7/i2a2

41

A RE-EXAMINATION OF THE CONFLICT

RULES GOVERNING THE VALIDITY OF

INTERNATIONAL CONTRACTS

Prince Obiri-Korang*

Abstract

Generally, under choice of law, the issue of uncertainty associated with the

determination of the governing law of international contracts is quite clear. The level

of this uncertainty, however, increases when dealing with questions about which

law governs the validity of such contracts. Like other areas of private international

law, matters concerning validity present several unique challenges both in theory

and in practice, making it the most complicated topic in private international law

literature. In fact, the uncertainty in this area has led to a situation where different

rules are applied by different states, without taking into consideration the link that

should exist between the state whose law becomes applicable and the function that

the law is expected to serve – determining the validity of a contract. This article

attempts to contribute to existing literature on choice of law questions regarding

the validity of international contracts and also provides solutions, based on the

underlying principles of private international law of contract that effectively address

the uncertainty in this area of law. The article submits that the law that governs the

validity of an international contract must, at all times, be one that has a legitimate

interest in matters concerning the legality or otherwise of such contracts. In this

regard, the article strongly opposes the theory that the parties’ intention determines

the law that governs the validity of their contract. After a careful examination

of literature and landmark judicial decisions in both civil law and common law

jurisdictions, the ar ticle concludes that the lex loci solutionis is the appropriate law

to determine matters relating to the validity of international contracts.

Keywords: choice of law; validity of international contracts; lex loci

solutionis; party autonomy; intention theory; lex loci contractus

Résumé

De manière générale, lors du c hoix de la loi par les parties, la question de l’incertitude

associée à la détermination de la loi applicable aux contrats internationaux est

assez évidente. Cependant, le degré de cette incertitude augmente lorsqu’il s’agit de

savoir quelle loi régit la validité de ces contrats. A l’instar d’autres domaines du droit

international privé, les questions de validité présentent plusieurs défis uniques tant

en théorie qu’en pratique, ce qui en fait le sujet le plus complexe dans la doctrine

* BSc LLB (Cape Coast), PLT LLM LLD (Johannesburg). Postdoctoral Research Fellow,

Research Centre for Private International Law in Emerging Countries, Faculty of Law, University

of Johannesburg. The author is grateful to Professor Michael Martinek for his extensive reading of

earlier drafts of this manuscript and his many helpful comments.

(2020) 7(2) Journal of Comparative Law in Africa 41

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42 JOURNAL OF COMPARATIVE LAW IN AFRICA VOL 7, NO 2, 2020

https://doi.org/10.47348/JCLA/v7/i2a2

sur le droit international privé. En effet, l’incertitude dans ce domaine a conduit à

la situation où différentes règles sont appliquées par différents États sans prendre

en compte le lien qui devrait exister entre l’État dont la loi devient applicable et

la fonction que la loi est censée remplir – déterminer la validité d’un contrat. Cet

article tente de contribuer à la doctrine existante sur les questions de choix de la loi

concernant la validité des contrats internationaux et, en outre, propose des solutions,

basées sur les principes sous-jacents du droit international privé des contrats, qui

répondent efficacement à l’incertitude dans ce domaine du droit. L’auteur soutient

que la loi qui régit la validité d’un contrat international doit, à tout moment, être

celle qui a un intérêt légitime dans les questions concernant la légalité ou non de

tels contrats. À cet effet, il s’oppose fermement à la théorie selon laquelle l’intention

des parties détermine la loi qui régit la validité de leur contrat. Après un examen

attentif de la doctrine et des décisions judiciaires marquantes tant du droit romano-

germanique que des juridictions de Common Law, l’article conclut que la lex loci

solutionis est la loi appropriée pour trancher les questions relatives à la validité des

contrats internationaux.

Mots clés: Choix de la loi applicable; validité du contrat international;

lex loci solutionis; autonomie des parties; théor ie de l’intention; lex loci

contractus

Introduction

In private international law, the issue of uncertainty with respect to the

determination of the governing law of an international contract is quite

clear. This uncertainty increases when dealing with questions about

the law that governs the validity of such international contracts.1 This

article examines existing theories and rules of choice of law on the issue

of validity of contracts, and then adopts a just position, based on the

underlying principles of the private international law of contract.

Like the other areas of private international law, the question of validity

presents several unique challenges, both in theory and in practice. In the

words of Beale, ‘no topic of the conflict of laws is more confused than

that which deals with the law applying to the validity of contracts’.2

This pronouncement and other similar ones by renowned jurists and

the courts3 makes it necessary for a solution to be found to the existing

‘confusion’ in this area of law, so as to allow businesspersons to accurately

predict the rules governing the making of their contracts.

1 Beale, J.H. ‘What law governs the validity of a contract’ (1909) 23 Harvard LR 1 at 1;

Ehrenzweig, A.A. ‘Contracts in the conflict of laws: Validity’ (1959) 59 Columbia LR 973 at 973.

2 Ibid.

3 Mor ris, J.H.C. ‘The eclipse of the lex loci solutionis – A fallacy exploded’ (1953) 6 Vanderbilt

LR 505 at 505; Cheatham, E.E. et al Cases and Materials on Conflict of Laws (1951) 493; Ehrenzweig

op cit note 1 at 974; Oliver, C.T. ‘Standardisation of conflict-of-law rules for inter national contracts:

Should there be a new beginning?’ (1959) 53 American JIL 385 at 385.

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