Choice of Law Methods in The Private International Law of Contract

Choice of Law Methods in the Private
International Law of Contract

JOOST BLOM*
Parti
F OR ANYONE who is interested in the methodology of choice of law,

no field is more rewarding than that of contracts. As domestic
laws of contracts develop a progressively more intricate relationship
between the principles of social regulation and private autonomy,
private international law is led to develop choice of law techniques
that will keep an appropriate balance between these principles in
interjurisdictional cases. Choice of law rules that underemphasize
the interests of the parties, and rely instead on the regulatory con-
cerns of states that are affected by the transaction, may place too
many obstacles in the way of persons who should be left to arrange
their transaction in the way they think best. At the same time, choice
of law rules that give too much weight to the parties' wishes may
interfere unduly with a state's ability to regulate a transtaction with
which it has a legitimate concern. In this respect, balance is more
difficult to achieve in contracts than it is elsewhere. In the fields of
domestic relations and torts, implementing rules of social order plays
the primary role. In the field of property, the essence of the problem
is devising rules that will protect private interests. But contracts is a
field of shifting priorities between legislative ordering and private
ordering, and consequently, for private international law, it is a field
of difficult methodological choices.
* Associate Professor, Faculty of Law, University of British Columbia. This

article is the first part of a paper that was originally prepared in partial ful-
filment of a degree programme at Harvard Law School and was one of the
two papers awarded the Addison Brown Prize for 1977-78. The author wishes
to thank Professor A. T. von Mehren for his advice and encouragement. The
second part will be published in the next volume of this Yearbook.
230
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Choice of Law in Contract 231
This article attempts to trace the main features of the choice of

law methods that four legal systems have developed for cases relating
to the validity of contracts. The present part is devoted to the French
and German systems for choice of law. The concluding part, which
will appear in the next volume of the Yearbook, will examine the
American and Anglo-Canadian systems. The discussion is confined
to issues of substantial or essential validity. Problems such as forma-
tion and capacity to contract raise especially complex theoretical
questions, and for this reason have had to be left aside.
FRANCE
The French Civil Code makes no mention of any choice of law
principles to be applied to contracts. The cases are relatively scarce,
and tend to state the law in the form of generally worded principles,
so that the precise content of a given rule is often hard to establish.
Moreover, as will be seen, the commentators, in their efforts to
supply the doctrine that the courts have not produced, have played
a large role in shaping the current French law.
The Theory of the Autonomy of the Parties and Responses to It

It was not until a relatively recent stage that the French courts
adopted the position that the parties' intentions were the primary
criterion for determining the law that applied to a contract. Before
1910, French courts generally followed the locus regit actum prin-
ciple and applied the law of the place of contracting.1 Some indica-
tions of a shift could be seen towards the end of that period. In 1884,
an exception to the lex loci contractus rule was said to exist where
the juridical act in question (there the drawing and delivery of a
bill of exchange) was done between two persons of the same na-
tionality, and the circumstances permitted the inference that those
persons intended to submit themselves to the laws of their home-
land.2 Ten years later, in an action by cargo owners against a ship's
master, in which the defendant relied on English law as rendering
valid certain exclusion clauses in the bill of lading that were unen-
forceable in French law, the Chambre Civile of the Cour de Cassa-
1
Cass. civ., February 23, 1864, S. 1864. I. 385; H. Batiffol, Les conflits de lois
en matiere de contrats 27-29 (1939), (hereinafter Batiffol, Contrats); 2
Batiffol, Droit International Prive 222 (6th ed. 1976, with P. Lagarde),
(hereinafter Batiffol); 2 E. Rabel, Conflict of Laws 398 (ad ed. 1958).
2
Vorbe v. Vorbe, Cass. req., May 19, 1884, S. 1885. I. 113, note Lacointa.
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232 The Canadian Yearbook of International Law igjB
tion asserted the primacy of French law as a matter of ordre public,

"even if foreign law is [otherwise] applicable because the parties
expressly or even implicitly made their agreement with reference
to it."3
In American Trading Co. v. Societe de Navigation "Quebec
Steamship Co" in 19io,4 however, the Cour de Cassation for the
first time clearly enunciated the principle of the autonomy of the
parties, or "autonomy of will" (autonomie de la volonte], although
it applied the principle in a way that left the court's reasoning some-
what obscure. An action was brought in Guadeloupe, a French West
Indian island, by the American Trading Company, consignees of a
cargo of flour to be delivered at the island, against the carriers, the
Quebec Steamship Company, who had issued their bill of lading
upon receipt of the cargo in New York. The flour had been con-
taminated during the voyage by being improperly stowed near a
quantity of chemical fertilizer. The bill of lading5 exempted the
carrier from liability under these circumstances. The plaintiff argued
that the Harter Act of the United States6 applied and that the
exempting clause was therefore invalid, both because New York
was the place of contracting, and because the contract provided
expressly that the agreement would be governed by that statute.
There was no generally worded choice of law clause. The Chambre
Civile, affirming the Cour d'Appel of Guadeloupe, held that the
validity of the clause fell to be judged by French law.
The locus re git actum rule was rejected in the following terms:
The law applicable to contracts, with respect to questions of their
formation, as well as their effects and conditions, is the law that the
parties have adopted; ... although, where the parties are of different
nationalities, the law of the place where the contract was made is in
principle the law by which it must be governed, that is true only so far
as the parties have not manifested a contrary intention;... not only may
this manifestation be express, but ... it may also be shown by the facts
and circumstances of the case, as well as by the terms of the contract.7
3
Crowley v. Saint freres, Cass. civ., June 12, 1894, [1894] Journal de droit
international (Glunet) 806 (hereinafter Clunet). All translations from
French and German sources are rny own, unless noted otherwise.
4
Cass. civ., December 5, 1910, S. 1911. I. 129, note Lyon-Caen.
5
The report is not clear on whether the clause was in a bill of lading or in a
charterparty whose terms were incorporated into the bill of lading; the words
"connaissement" and "charte-partie" are used interchangeably.
6
Act of Congress of February 13, 1893.
7
Supra note 4, at 132.
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The "facts and circumstances of the case" might not have been
thought to point to French law. New York was the place of con-
tracting, and the bill of lading referred to an American statute. The
ship was British. The only connections with French law were the
port of discharge and, possibly, the consignee's nationality. But, said
the court, the plaintiff knew when it accepted the bill of lading with
the exonerating clause that this clause "had to be executed on French
territory, where it is considered valid."8 The express reference to the
Harter Act was not construed as a selection of the law of the United
States as governing the bill of lading generally; according to the
Cour d'Appel's construction of the bill of lading, which the Cour de
Cassation felt it could not disturb, the reference merely meant that
the statute was to govern only "those matters that had not been
expressly provided for by the charterparty."9 However curious the
result was on the facts, the court's formula became the touchstone
for all future cases, almost up to the present.
The American Trading Co. decision gave fresh impetus to a
debate that had already been in progress for some time among
French scholars, about the propriety of allowing the parties to a
contract to determine the law applicable to their agreement.10 The
foremost protagonist in this debate became Professor Niboyet, who
launched a frontal attack on the doctrine of party autonomy.11 His
argument, put forward in the nineteen-twenties,12 was based on the
distinction between mandatory or imperative, and facultative or
suppletive dispositions. He thought it was inconsistent with the very
nature of mandatory rules of law to allow their application to be a
matter for choice by private parties. "The task that private inter-
national law sets for itself," he wrote, "is to preserve the essential
character of the legal rules with which it deals. Rules that are man-
datory in domestic law ought, without exception, to retain this char-
8
Idem.
9
"Charterparty": see note 5 supra.
10
See Curti-Gialdino, "La volonte des parties en droit international prive,"
t'972] 3 Hague Rec. 499, at 765, n. 31, and see especially A. Fillet, Prin-
cipes de Droit International Prive 434-38 (1903).
11
Niboyet, "La theorie de 1'autonomie de la volonte," [1927] i Hague Rec. i ;
5 J.-P. Niboyet, Traite de droit international prive francais 51-59 (1948).
See also M. Caleb, Essai sur le principe de 1'autonomie de la volonte en droit
international prive (1927), esp. chap. II, 61-125.
12
Niboyet, "La theorie de 1'autonomie de la volonte," supra note n, at 12-15,
36, 53-58.
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234 The Canadian Yearbook of International Law 1978
acter in international law, so as not to lose, at least where it is un-

necessary, all their efficacy in their territorial operation, and not to
have their social purposes frustrated."13 He was particularly troubled
by the possibility that, if the principle of autonomy were accepted,
the parties could choose legal rules selectively from different legal
systems. They could, by a form of agreed depe$age, select the rules
that suited their convenience from however many laws they liked
and reject the rest. The result would be that they would be governed
by no law.14 Niboyet's solution was that a single law must be deter-
mined whose mandatory rules would apply to the contract, and
whose facultative provisions would thus fix the limits of the parties'
freedom of contract.15 This law, he suggested, ought to be deter-
mined on the basis of the type of contract in question: for example,
the lex rei sitae for sales of immovable property, the law of the
country where the relevant stock exchange was located for contracts
for the sale of shares, and so on. The selection of the appropriate law
would be based on the degree to which a country's administrative
and regulatory interests were affected by the particular type of trans-
action.16
Niboyet's system is very forward-looking in its emphasis on the
regulatory interests of states that are connected with the contract,
and in this respect it resembles some of the newer American method-
ology, including that of the Second Restatement. On the other hand,
Niboyet's insistence that the distinction between mandatory and
facultative legal rules had to be carried forward intact from the
domestic to the international legal sphere, and that the parties' in-
tentions were therefore irrelevant to the question of which law's
mandatory rules should apply, has more in common with Beale and
the First Restatement.17
The theoretical objections of French writers to party autonomy
have gradually been dissipated by the steadfast course of judicial
decision after 1910. Niboyet's own treatise, published in 1948, re-
« ibid., 54.
14
Ibid., 34-36.
15
Ibid., 112.
16
Ibid., 99-106.
17
References in this article to the First and Second Restatements are to, respec-
tively, American Law Institute, Restatement of the Law on the Conflict of
Laws (1934), and, by the same Institute, Restatement of the Law, Second:
Conflict of Laws 2d (1971).
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peated his theoretical objections to thé principle but accepted as law

thé right of thé parties to sélect a governing law for their contract.
He urged, however, that this right should at least be kept within
bounds; if thé parties selected a légal System, they ought to be bound
by it as a governing law, not as thé contents of a contract they could
modify as they pleased. If thé chosen law said their contract was
invalid, so it ought to be. The chosen law should also apply as a
"living" System, including any législative changes after thé date of
thé contract.18 Moreover, certain contracts, like contracts of employ-
ment and insurance, should not be subject to a sélection of law by
thé parties.19
The most influential modem writer, whose views on this subject
were first put forward in I939,20 is Henri Batiffol. He, like most
récent writers,21 does not accept Niboyet's thesis that mandatory
rules, by définition, cannot be thé subject of party choice. But he
has nevertheless promoted, with gréât consistency over forty years, a
theory that retains thé notion that thé parties cannot "legislate" by
selecting thé law to govern their contract. This is his theory of
"localization."
I think that thé parties do not choose thé law applicable to their con-
tract; they localize their agreement, and based on this localization thé
judge détermines thé applicable law. Even if they hâve expressly indi-
cated that they submit their contract to a particular law, that is merely
18
5 J--P- Niboyet, Traité de droit international privé français 56-58 (1948).
19
Ibid., 60-62. The full list of contracts not subject to a choice of law by thé
parties included contracts of incorporation and association; contracts of em-
ployment; contracts for thé division of property on death; contracts to make
gifts; stock exchange transactions; contracts infringing currency restrictions;
contracts of insurance (except marine insurance) ; and contracts for services.
A scheme very similar to Niboyet's was proposed by Schnit/er, "La loi ap-
plicable aux contrats," [1955] Revue Critique du Droit International Privé
459, (hereinafter Rev. Crit.). He would likewise first sélect a governing law
on thé basis of thé type of contract involved, and then permit thé parties a
choice of law to thé extent allowed by thé governing law. His System differs
from Niboyet's in that he would permit a full choice of law if that were thé
conflicts rule in thé country whose law governed, whereas Niboyet would
merely permit thé parties to incorporate laws to thé extent that thé facultative
rules of thé domestic foreign law allowed thé parties freedom to fix their
terras.
20
Batiffol, Contrats.
21
P. Lerebours-Pigeonnière and Y. Loussouarn, Droit International Privé 440-
45 (gth éd. 1970) ; A. Toubiana, Le domaine de la loi du contrat en Droit
International Privé 24-27 ( 1 9 7 2 ) ; Curti-Gialdino, supra note 10, at 767-68,
779-82.
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one aspect of this localization — just a single factor whose présence,

pure and simple, thé judge may not regard as décisive.22
Batiffors reasoning reveals his concern to find a single, generative

principle from which thé solutions to contractuel choice of law prob-
lems can be deduced. He sees thé "localization" theory as thé only
means of avoiding thé difficulties posed by two other alternatives.
One alternative view, which he labels thé "subjectivist,"23 is that
thé parties, by selecting a law, just incorporate it into their contract.
The problems this raises are those that also troubled Niboyet: thé
parties can incorporate laws selectively or in combination, they can
choose to submit to no law, and so on.24 The alternative at thé
other extrême is to say that thé parties hâve complète freedom to
choose a governing law, which applies as law, not as a set of con-
tractual terms. This view, according to Batiffol, is likewise to be
rejected, although his reasons on this point are less fully developed.
Apparently it is to be rejected in part because, in his opinion, it is
illogical to say that a choice of law has légal effect without specify-
ing thé System of law from which it dérives that effect.25 Moreover,
this theory also leads to inconvénient results: thé parties could
choose a law totally unrelated to their contract; thé parties to a
wholly "domestic" contract could choose to hâve it governed by a
f oreign law ; and so f orth. By denying that thé parties' choice is itself
determinative of thé governing law, and by insisting on viewing thé
contract as a whole, we obtain thé flexibility that contracts require,
as well as a means of applying a governing law other than thé one
chosen if thé latter seems unacceptable under thé circumstances. This
theory also has thé attraction for Batiffol that it avoids a methodo-
logical dichotomy between cases where there is a choice of law by
thé parties and cases where there is none; there is not a "subjective"
test for thé former, and either an "objective" or a fictitiously sub-
jective one for thé latter.26
22
Batiffol, Contrats 38-39. For similar explanations, see 2 Batiffol 236-43;
Batiffol, "Subjectivisme et objectivisme dans le droit international privé des
contrats," in H. Batiffol, Choix d'Articles 249 (1976).
23
Batiffol, "Subjectivisme et objectivisme, etc.," supra note 22, at 252-55.
24
2 Batiffol 233-34; Batiffol, "Subjectivisme et objectivisme, etc.," supra note
22, at 252-54.
25
2 Batiffol 241. The most obvious answer to this question is that thé conflicts
rule of thé forum gives it such effect; but Batiffol criticizes this solution on
thé ground that it subjects thé validity of thé parties' agreement to a law that
is fixed a posteriori and dépends on thé accidents of litigation, ibid., n. 21 bis.
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The theoretical neatness of this solution, however, belles its under-

lying problems.27 The notion of "localizing" is ambiguous. It can
mean an assessment of thé physical connections between thé trans-
action and différent légal districts, a form of "contact-counting." Or,
giving it a more complex meaning, it can be an assessment of thé
degree to which thé économie activity in thé transaction falls within
thé sphère of interest of one or another légal System.28 It can further
involve an examination of how closely thé légal structure of thé
contract — its drafting, thé substance of its terms — associâtes thé
contract with a particular légal System.
Batiffol seems to include ail of thèse in his System. He arranges thé
various factors to be taken into considération in a scheme of priori-
ties. In thé first rank he puts what he calls "extrinsic" factors, of
which thé strongest is an express choice of law, and which also in-
clude thé use of a type of contract indigenous to one law, or référ-
ences in thé contract to spécifie provisions of a certain law. Thèse
are stronger than "intrinsic" factors like thé choice of a place or
arbitration, thé localization of thé subject matter of thé contract, thé
place of performance, and thé place where thé contract was made.29
It is hard to see, however, how — to take thé factors at thé two
extrêmes of Batiffol's scale — an express choice of thé law of A can
be "weighed" in any meaningful way against thé fact that thé con-
tract was made and to be performed in B. The only indication he
gives on this question is to say that for thé parties' choice to be given
effect thé parties "must hâve placed themselves, at least in part,
within thé orbit of thé chosen System."30 He adds that a libéral view
should be taken of what places a contract within that orbit; a con-
tract should be seen as an économie activity that might affect third
parties such as insurers and creditors, so thé relevant connections
with a country should not be limited to obvious ones like thé places
of exécution and performance.
26
Batiffol, Contrats 39-41; 2 Batiffol 239-40; Batiffol, "Subjectivisme et ob-
jectivisme, etc.," supra note 22, at 261-63.
27
See Vischer, "The Antagonism between Légal Security and thé Search for
Justice in thé Field of Contracts," [1974] 2 Hague Rec. i, at 37.
28
Batiffol does not suggest différent localizations for thé purpose of différent
issues, so this "sphère of interest" would be one that took into account ail of
a state's potential concerns with a contract.
2
« 2 Batiffol 258-72.
30
Ibid., 243.
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Although, as we shall see, some décisions of thé courts lend sup-

port to Batiffors theory, it cannot be said to hâve won complète
acceptance, either in thé courts or among other commentators.
Lerebours-Pigeonnière and Loussouarn, for example, note that while
thé concept of localization can usefully be applied to contracta that
hâve no express choice of law, where there is such an express choice
it is "difficult to regard such a choice as nothing more than a localiz-
ing élément of thé contract."31 In their view an express choice should
be looked upon as a sélection of thé governing law.32
Décisions of thé French Courts on thé Law Governing thé

Validity of Contracts
Where There is an Express Ghoice of Law
We hâve seen that one characteristic of thé theoretical discussion
in this area has been thé uncertain status of an express sélection of
foreign law. According to Batiffol it is an élément in thé "localiza-
tion" of thé contract. Niboyet argued that its only permissible func-
tion was as a contractual incorporation of thé foreign law, valid
to thé extent permitted by thé law whose mandatory provisions
governed thé contract. On a third view, thé one Batiffol calls thé
"subjectivist," a choice of law is a contractual adoption of thé rules
in that law, which may include mandatory as well as facultative
rules. A fourth alternative, which is that thé parties' express choice
does détermine thé governing law, by being given effect through thé
forum's conflicts law, is thé one favoured by Lerebours-Pigeonnière
and Loussouarn.33 The décisions of thé courts do not commit them
unequivocally to any of thèse views. The ambiguity of their position
is illustrated by décisions on two difficult points of principle: whether
thé parties can choose to hâve more than one law applied to their
contract, and whether they can choose a law as it stands at a particu-
lar time, excluding any changes in it thereafter.
On thé first question, of a choice by thé parties of différent laws
31
Supra note 21, at 443, n. 3.
32
They also refer to Article 2, para, i of thé Hague Convention on thé law
applicable to international sales of tangible movable property, which provides
that "thé sale is governed by thé internai law of thé country designated by
thé contracting parties." This convention came into force on September i,
1964-
33
See supra note 31 and accompanying text.
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to govern différent issues in their contract,34 thé leading décision is

still thé American Trading Co. case.35 There United States law was
found to apply to matters not expressly provided for in thé contract,
because thé parties had so stipulated, but French law was applied to
thé rest. This could be explained either on thé basis that thé court
treated thé référence to thé Harter Act as a contractual inclusion and
thé contract as a whole as being governed by French law,36 or on
thé basis that United States and French law were treated as equal
in opération. If they were equal, this could be because both were
incorporated into a combined "contractual law" or both governed
différent parts of thé agreement as légal Systems in thé proper sensé.
The wording of thé judgment can be reconciled with any of thèse
interprétations. No later case has clarified thé matter.
Under Batiffol's theory of localization, of course, a contract can
be governed by only one law, because it will be localized in only one
country. Any référence to a law other than this one, if it is to hâve
any effect, must be treated as an incorporation. If, contrary to
Batiffol's view, thé parties' choice is viewed as a sélection of thé
governing law that is given effect by thé conflicts rule of thé forum,
a choice of two or more laws, governing parts of thé contract that
are severable for this purpose, seems unobjectionable on logical
grounds. The judgment of what matters are severable in this respect
should dépend, according to one French jurist, on whether thé com-
bined effect of thé two laws' being applied to those matters would
destroy thé cohérence of thé contract or of thé provisions of thé
applicable laws.37 Such a violation of thé cohérence of a law might
occur if thé parties elected to exclude thé mandatory provisions of
thé law but make use of its facultative provisions, thus possibly
removing thé protection that that law would otherwise provide for
thé weaker party to thé contract.
The second question, that of "freezing" a law as it stands at a
particular time, arose in Etat français v. Comité de la bourse d'Am-
34
For a général discussion of thé application of multiple laws to agreements, see
Lagarde, "Le dépeçage dans le droit international privé des contrats," [1975]
Revista di diritto internazionale privato e processuale 649.
35
Supra note 3. There is also a hint of such intentional dépeçage in Zanarelli v.
Société BSN, Cass. soc., March 5, 1969, [1970] Rev. Crit. 279, note Batiffol.
See esp. thé note, at 286.
36
Compare thé English case, G. E. Dobell & Co. v. Steamship Rossmore Co.,
[1895] 2 Q.B. 408 (C.A.).
37
Lagarde, supra note 34, at 670-71.
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sterdam, usually referred to as thé Messageries Maritimes case.38 It

was a "gold clause" case. A French company issued bonds in Cana-
dian dollars in 1927 to raise a total of $i i million. Part of thèse were
taken up in Amsterdam. Principal and interest were expressed to be
payable in gold currency of Canada, équivalent as to weight and
fineness to thé standard in effect on May i, 1927. Gold clauses such
as thèse became illégal and inoperative under Canadian law in 1937.
Nevertheless in 1950 thé Cour de Cassation upheld thé lower court's
finding that thé clause was effective and that thé bondholders were
entitled to payment in gold rather than dollars. The bonds were
apparently taken to be governed by Canadian law, but only as that
law stood in 1927. The court referred to a French law of June 28,
1928, which had declared gold clauses in valid for domestic, but valid
for "international" borrowings. The parties, it said, had manifested
their intention in this "international" contract to withdraw their
agreement from any future law changing thé value of thé Canadian
dollar. The effect of thé court's décision was therefore to subject thé
contract to no "living" System of law but only to a set of rules agreed
upon by thé parties.
The court's choice of words shows thé haziness of its analysis :
Though every international contract is necessarily governed by thé law
of some country, thé Cour d'Appel . . . has found . . . that thé transac-
tion . . . constitutes an international borrowing. . . . In such a contract
it is open to thé parties to agrée, even if such agreement is contrary to
thé mandatory rules of thé internai law that governs their agreement,
on thé inclusion of a gold clause, which is recognized as valid by thé
French law of 28 June 1928, in accordance with thé French conception
of international ordre public.39
On one reading of this passage, thé case shows an unusually broad
application of ordre public, in its invocation of a French statute as
giving thé parties more freedom than thé applicable foreign law
gave them. On another reading, thé court accepted thé principle
that thé parties may in général effectively agrée to exclude future
38
Cass. civ., June ai, 1950, S. 1951. I. i, note Niboyet; [1950] Rev. Crit. 609,
note Batiffol. For a slightly différent example, see Comptoir d'Escompte de
Genève v. Arnoux et Granier, Cass. req., August 2, 1926, [1927] Glunet 102,
where it was held that a bank account had two mômes of account, Swiss
francs and French francs, which were to be treated as at par, although their
values were différent, because "thé parity of thé Swiss franc and thé French
franc was thé contractual law to which thé bank and its customers agreed to
submit their reciprocal rights and obligations." Ibid., at 103.
39
[!95°] Rev. Crit. 609, at 610.
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changes in thé law governing their agreement. Whichever interpré-

tation is correct, thé Cour de Cassation's approach reveals considér-
able uncertainty about thé status and function of thé law chosen to
govern a contract.
Where There is No Express Choice of Law

The lack of any clearly articulated theory of choice of law shown
by thèse instances of half-explained multiple and partial choices of
law is also évident in cases in which thé parties made no express
sélection of a governing law. Until fairly recently thèse cases were
uniformly decided using thé formula of intention, but only rarely
was any distinction made between a real, but unexpressed intention
of thé parties, and an intention that thé parties never had, but that
was imputed to them as thé intention they would hâve had if they
had directed their minds to a choice of law at thé time of contract-
ing.40 The American Trading Co. case, it will be recalled, just spoke
of thé intention being shown by thé facts and circumstances of thé
case, as well as by thé tenus of thé contract.41 Generally thé courts
hâve simply reiterated this formula and stated their conclusion that
in thé case before them a particular law applied because thé parties
intended that it should.42
Some of thé cases are clear instances of real, inferred party inten-
tion: thé application of German law because thé parties stipulated
for arbitration in Germany ;43 thé application of French law because
thé parties referred specifically to thé provisions of a French statute ;44
thé application of thé law of French Indochina because thé contract
40
An exception is Epoux Roch v. Comptoir d'Escompte de Genève, Gass.
req., March i, 1926, [1926] Rev. Crit. 403, where thé Chambre des
Requêtes said: "The rules of private international law, which in thèse mat-
ters are based on thé presumed intention of thé parties, need not be applied
when this intention has either been expressed by thé parties or is implied by
thé facts as found and construed by thé judges in thé courts below." Similar
expressions were used in an almost identical case involving thé same bank,
Comptoir d'Escompte de Genève v. Arnoux et Granier, supra note 38.
41
Supra note 7 and accompanying text.
42
This is true particularly of thé Cour de Cassation, which usually treats thé
choice of law issue as a question of construction of thé agreement, a matter on
which it seldom reverses thé décision of thé judges of fact in thé lower courts.
43
Coopérative agricole de Maisse v. Getreide Import-Gesellschaft, Cour d'Appel
de Paris, October 26, 1962, [1965] Rev. Crit. 535, note H.B.
44
Mutuelle Générale Française Accidents v. Consorts Lavezard, Cass. civ., ire
ch., November 21, 1973, Bull. civ. 1973. I. 283.
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242 The Canadian Yearbook of International Law iQj8
provided that thé parties hereby elected domicile in Hanoi.45 Other

cases appear to involve an intention imputed to thé parties, used as
a formula for thé court's détermination of thé governing law based
on thé circumstances of thé case. Thus thé lease of an immovable
property in Constantinople was held to be intended to be governed
by Turkish law, without any examination of thé contracté terms.46
Similarly a contract for thé sale of a business in thé Ivory Coast,
where both buyer and seller were domiciled in Marseilles, was held
intended to be governed by French law rather than by thé law of thé
place where thé business was situated.47 The American Trading Co.
case itself is an example of imputed intention.
In récent years, in cases where no intention was expressed or easily
inferred, thé language of intention has yielded somewhat to language
that shows thé effects of Professor BatifToFs proselytizing. The first
of thèse, in 1952, was a case in which any talk of intention would
hâve had a hollow ring, because at thé time of contracting thé parties
could not hâve foreseen any need to choose between légal Systems.
Two French companies having their head offices in France con-
tracted for thé sale and purchase of an immovable in Dahomey, for
a price of rive and a half million francs. At that time "metropolitan
francs" were interchangeable with "francs CFA" (colonies françaises
d'Afrique ), thé currency of Dahomey, but a month later thé metro-
politan franc was given a différent parity from thé franc CFA. The
decree effecting thé change included a presumption that unless
otherwise agreed, ail debts expressed in francs were to be discharged
in metropolitan francs. The Chambre Civile of thé Cour de Cassa-
tion held that thé franc CFA was thé currency that defined thé
obligation. The court decided that thé lower courts had correctly
"identified thé pattern [économie] of thé contractual transaction iri
seeking to establish, where both thé Code and thé contract are silent,
thé presumed intention of thé parties with respect to thé localization
of their agreement and thé conséquences this has in relation to thé
45
Veuve Wanègue v. S.A.R.L. "Air Outre-Mer" Cour d'Appel de Paris, ire
ch., October 9, 1962, [1964] Rev. Crit. 467, note Simon-Depitre.
46
L'Etat v. Veuve Carathéodory, Cass. civ., May 31, 1932, S. 1933. I. 17, note
Niboyet; Veuve Carathéodory Pacha v. l'Etat, Cass. req., November 2, 1937,
S. 1938. I. 30.
47
Société Cametz v. Rousset, Cass. civ., June 28, 1966, [1967] Rev. Crit. 334,
note Batiffol. Cf. de. française de l'Afrique occidentale v. Société du Haute
Ogooué, Cass. civ., April 24, 1952, [1952] Rev. Crit. 502, note Motulsky; S.
1952. I. 185, where thé sale of an immovable in French West Africa by one
French company to another was held to be governed by thé lex rei sitae.
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money of account."48 Though this marked thé first use of thé term
"localization,"49 thé formula of intention remained prominent.
A few years later, however, thé Cour d'Appel of Paris made thé
distinction between intention and localization more precisely. In
Société Jansen v. Société Heurty,50 it stated thé issue as follows :
Whether one can find in thé parties' correspondence clear évidence of
their cornmon intention, implicit, to be sure, but effective, to conform
to French law, or whether ... any évidence of their apparent intention
being absent, one should apply thé French conflicts rule according to
which in such cases, thé law governing thé contract is not determined
by divining a "presumed" intention of thé parties, which is merely
making abstractions, but is found in an objective manner, based on thé
fact that thé contract is localized, by its context and by its nature, in a
given country.51
The action was brought by a French company that distributed

manufacturing equipment made by thé défendant German com-
pany, seeking return of thé purchase price of certain equipment and
damages. The question was thé validity of a choice of forum clause,
which issue thé court held to be governed by thé law applicable to
thé contract. The court said :
The place with which thé contractual transaction has its closest con-
nection is thé place where thé spécifie acts of performance of thé con-
tract, in exécution of thé obligation that is characteristic of that type of
contract, must be performed.... [T]he law of thé country where this
obligation is executed has a still stronger claim to govern thé contract
when thé party on whom this obligation rests has his domicile in thé
same country.52
This appears to be a version of contact-counting that emphasizes thé
physical contacts between thé transaction and a country. The "char-
acteristic" performance of selling and delivering thé equipment to
thé distributor (in Germany) had more weight than thé "général"
one of payment (in France) ; this weight was increased by thé factor
48
de. française de l'Afrique occidentale v. Société du Haute Ogooué, supra
note 47, at 503.
49
See thé note by Motulsky to thé case cited supra note 47, at 505.
50
Cour d'Appel de Paris, January 27, 1955, [1955] Rev. Crit. 330, note
Motulsky.
51
Ibid., 335.
52
Idem. For another instance of a lower court's handling of thé "localization"
problem, see Noblesse v. Société Haviland, Cour d'Appel de Limoges, No-
vember 10, 1970, [1971] Rev. Crit. 703.
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244 The Canadian Yearbook of International Law /97#
of thé defendant's domicile. There was no considération of thé policy

of thé rule involved or thé type of interest each country might hâve
had in thé resolution of thé issue in favour of its own law.
The Cour de Cassation, by contrast, has never committed itself to
such an "objective" interprétation of thé "localizing" test. A récent
case, for example, involved a setlement by correspondence in France
of thé debt on a bank crédit operated in Mali. The question was
whether French francs or thé currency of Mali was thé money of
account in thé settlement agreement. The Chambre Civile said:
"The judges below make thé définitive assessment of thé circum-
stances that détermine thé localization of a contract, from which
they deduce thé law that governs thé contract."53 It approved thé
Cour d'Appel's conclusion that French law applied, on thé grounds
that thé settlement was to be viewed as a novation of thé contract,
it was made in France, and "it was to French law that thé parties
had intended to refer."54 Aside from their use of thé word "localiza-
tion," thé court's approach seems indistinguishable from that used
in older cases.
Other décisions of thé Cour de Cassation hâve been no more con-
clusive.55 Its most récent expressions on choice of law in contract are
even more than usually Delphic. In National Commercial Bank v.
Société Entreprise Jean Lefebvre56 a French company, thé plaintif!,
was called in to render technical assistance in completing a road
works project in Saudi Arabia. After thé company had signed a
protocol with thé Saudi contracter, thé défendant Saudi Arabian
bank, which had been involved in thé negotiations between thé
plaintiff and thé contracter, sent a letter to thé plaintif! saying that
thé bank, in agreement with thé contracter, had accepted thé financ-
ing of thé project to its completion. The question was whether this
letter was an assumption of liability on thé bank's part towards thé
53
Nasser v. Banque commerciale africaine, Cass. civ. June 29, 1971, [1972]
Clunet 51, note Kahn.
54
Ibid., 52.
55
Société de Fourrures Renel v. Allouche, Cass. civ. July 6, 1959, [1959] Rev.
Crit. 708, note Batiffol ("thé judges below détermine, based on thé pattern
of thé agreement and thé circumstances of thé case, what law ought to govern
thé relations between thé parties") ; Richard v. The Shell Petroleum Co. Ltd.,
Cass. civ., November 9, 1960, [1961] Rev. Crit. 135; [1961] Clunet 774 (thé
Cour d'Appel could "décide that on thé basis of its findings of fact, localizing
thé contract," a certain law should apply).
56
Cass. civ., ire ch., October 29, 1974, [1976] Rev. Crit. 91, note Batiffol.
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plaintiff. To this question thé First Chambre Civile applied French

law. The court said :
In thé absence of an express agreement by thé parties on thé détermina-
tion of thé law governing thé contract, and thé only laws invoked by
thé parties being, respectively, French law and Saudi Arabian law, thé
Cour d'Appel, having pointed out that Saudi Arabian law was not
appropriate to thé factual pattern of thé agreement, has correctly de-
cided that thé solution was to apply French law, based on thé findings
of fact that were thé court's to make, and interpreting thé common
intention of thé parties with respect to thé localization of their con-
tract.57
One is at a loss to know what test is being employed hère. Some

form of imputed intention, an objective assessment of thé contacts
with thé two countries involved, and a new notion of thé "appro-
priateness" of thé law in question ail seem to hâve played a part in
thé court's thinking. BatifFol has seen in this décision thé insinuation
of a "better law" type of analysis into thé French choice of law rules,
which in his view, if taken far enough, will reduce thé choice of law
process to thé expression of thé arbitrary préférences of thé court.58
Summary
The Une of décisions of thé Cour de Cassation since thé principle
of party autonomy was first received into its jurisprudence in 1910
has not settled on a clearly articulated methodology for choice of law
in contract. A finding of an actual intention as to thé governing law
is clearly important, but whether it is to be regarded as an incorpora-
tion or a choice of governing law, and whether a court can reject
thé law intended by thé parties in favour of another, hâve not been
established. There are strong indications that Batiffol's notion of
"localization" has support, but it has never been applied by thé
Cour de Cassation without auxiliary références to presumed inten-
tion. Also, it has never been applied in a case where thé parties' in-
tention was expressed, so thé crux of Batiffol's theory, that thé
parties' intention is just part of thé factual matrix on which thé
localizing process is based, has not been put to thé test.
It does seem clear that thé adoption, if it amounts to that, of thé
localization theory by thé Cour de Cassation and lower courts has
not made a fundamental change in thé way that thé governing law
57
Ibid., at 92.
58
See his note, ibid., 94.
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for a contract is found, because "subjective" factors, such as thé

légal structure of thé contract and thé convenience of thé parties,
continue to carry at least as much weight (more, according to
BatifTol's scheme of localizing factors) as "objective" physical con-
tacts between thé transaction and a particular country, such as thé
places of exécution and performance. Although thé Cour d'Appel of
Paris, in thé Société Jansen case discussed earlier,59 seemed to lean
towards a more strictly objective view of localization, focusing on
what thé parties did rather than on what they intended, thé same
court has on a later occasion shown gréât willingness to départ from
thé factually most closely connected jurisdiction for subjective rea-
sons. In Association Prohuza,60 thé court held that a contract of lease
of an immovable in Algeria, entered into after Algerian indepen-
dence, was governed by French law and that thé rent was therefore
to be paid in France, in French currency. It relied on thé facts that
both parties were French, and that thé tenant had for a time paid
rent by chèque payable in France, thus conforming to thé French
rule that thé place of payment of rent is thé domicile of thé debtor,
and showing that thé parties had regulated their performance of thé
agreement according to French law.
At any rate, presumptions do not seem to be part of thé evalua-
tive process. There was a suggestion in thé American Trading Co.
case61 of a presumption, echoing thé former locus régit actum rule,
in favour of thé law of thé place of contracting. Such a presumption
has not survived. It may still be useful to rank thé possible contacts
in order of their significance, as Batiffol suggests,62 but thé courts
hâve not donc so, preferring instead an assessment of thé facts of
each case without an a priori préférence for some éléments over
others.
Rules Derogating from General Choice of Law Principles

for thé Validity of Contracts
We are not concerned hère with aspects of thé contract for which
laws other than thé lex contractus may be relevant, such as form,
59
60
Cour d'Appel de Paris, June 10, 1967, [1968] Clunet 100. See also Société
Nationale des entreprises de presse v. Robe, Trib. de grande inst. de la Seine,
February 23, 1966, [1967] Rev. Crit. 130, note Dayant.
61
62
2 Batiffol 271-72.
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consent, capacity, or method of performance. The rules to be dis-

cussed are those that eut into thé lex contractus itself. The French
rules in this area are of spécial interest, because they hâve been more
elaborately developed, by thé courts and particularly by writers, than
elsewhere.
The principle that cornes first to mind is ordre public. Though
apparently broader than its common law counterpart, public policy,
its limits are ill defined. Its function is "unilatéral," that is, its appli-
cation can only resuit in French légal concepts being applied in thé
place of an otherwise applicable foreign law.63 Lerebours-Pigeon-
nière and Loussouarn describe ordre public as operating in two situ-
ations: (a) when a foreign law "offends against principles of public
or private law common to civilized nations, expressing objective
morality and justice," and (b) when thé application of foreign law
"causes a serious injury to thé interests of French law because of thé
foreign law's différent moral, social and économie purposes, so that
thé interests of French law must be given priority over those of inter-
national commerce and comity."64 BatiffoPs description is somewhat
more extensive; while accepting Lerebours-Pigeonnière's description,
he adds that ordre public will be applied "to safeguard certain légis-
lative policies,"65 an expression that offers more scope for thé prefe-
ence of particular French laws over differing foreign rules. Thèse
writers agrée, however, on thé impossibility of predicting with any
confidence when ordre public will be invoked in any given case.
A few examples will hâve to indicate sufficiently thé kinds of cases
in which ordre public has been applied in contractual situations. An
Algerian law under which a debtor company's assets had been na-
tionalized, but its liabilities had not been assumed, by thé Algerian
government, was held contrary to ordre public ; thé debtor was
accordingly held discharged by thé nationalization.66 By contrast,
thé application of a Dutch law enacted after World War II to
scrutinize wartime transfers in shares, which law had thé effect of
depriving a French citizen, without compensation, of her shares in
thé Royal Dutch Petroleum Company because she failed to report
63
i Batiffol 455.
64
Op. cit. supra note 21, at 500.
65
i Batiffol 448-52.
66
de. algérienne de tracteurs v. Etablissements Bartagna, Trib. de grande inst.
de la Seine, March 17, 1966, [1966] Clunet 831, note P.C.
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248 The Canadian Yearbook of International Law igjB
her shareholding by a certain deadline,was upheld.67 In thé Mes-

sageries Maritimes case, mentioned earlier,68 thé Chambre Civile of
thé Cour de Cassation seemed to treat as ordre public a French law
permitting parties to an "international" contract of loan to include
gold clauses, cancelling thé effect of thé Canadian lex contractus,
which had declared such clauses void. French laws rendering invalid
clauses in contracts of affreightment limiting or excluding thé car-
rier's liability in certain circumstances hâve been held to be expres-
sions of ordre public.69 But thé French law that requires rescission of
a contract to be by judicial act rather than by an act of thé innocent
party has not been applied where thé law governing thé contract
permitted rescission by thé innocent party alone.70 And thé French
Code of Civil Procédure provision that makes arbitration clauses
void where one or both of thé parties are not entering into thé con-
tract for commercial purposes71 has been held not to be ordre public,
and therefore to be inapplicable to contracts governed by foreign
law.72
A more récent doctrinal évolution than ordre public, and rather
more interesting from thé point of view of thé conflict of laws, is thé
notion of lois de police.73 This has its source in Article 3, paragraph
i of thé Civil Code, which provides that "Les lois de police et de
sûreté obligent tous ceux qui habitent le territoire." The principle,
however, has spread well beyond thé scope of thé article. It has been
used primarily to insist on thé application of certain French regu-
latory laws, mostly laws protective of thé individual in his relations
with stronger économie entities like employers, manufacturera, and
landlords, when thé application of ordinary conflicts rules would
hâve left no room for French law to be applied. One of thé areas
67
Epoux Adouze v. Koninklijke Nederlandsche Petroleum Maatschappij (Royal
Dutch), Cass. civ., October 17, 1972, [1973] Clunet 116, note Oppetit;
[1973] Rev. Grit. 520.
68
69
Crowley v. Saint frères, supra note 3; de. des messageries maritimes v. de.
d'assurances générales, Cass. civ., February 21, 1950, [1950] Rev. Crit. 427.
70
Société SICAP v. Société Jager, Cour d'Appel d'Amiens, April 9, 1968,
[1970] Rev. Crit. 448, note Batiffol.
71
C.P.C. Art. 1006, which provides that if thé issues being litigated and thé
names of thé arbitrators are not specified, thé clause will be void.
72
Coopérative agricole de Maisse v. Getreide Import-Gesellschaft, supra note 43.
73
See 2 Batiffol 245-47; Batiffol, "Le Pluralisme des méthodes en droit inter-
nationale privé," [1973] 2 Hague Rec. 75, at 136-45; Toubiana, op. cit. supra
note 21, at 208-32.
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most productive of litigation bas involved commercial agents or sales

représentatives. A law that was enacted for thé benefit of this group
is thé so-called VRP law, giving certain statutory rights and remédies
to travelling salesmen, sales représentatives, and canvassers (voya-
geurs, représentants et placiers).74 In particular, thé VRP law gives
thé salesman whose contract has been terminated without faute
grave on his part a right, regardless of any agreement to thé con-
trary, to an indemnity for thé net value of thé clientèle his work has
created for thé employer.75 The Section Sociale of thé Chambre
Commerciale, Cour de Cassation, held in 1960 that this right be-
longed to a sales représentative in Marseilles who worked for a
Czechoslovakian firm, simply because he performed his duties in
France, and regardless of what law governed thé employment rela-
tionship as such.76 The court used thé expression ordre public, but
thé case is probably better regarded as an example of a loi de police,
especially since thé courts hâve made it clear that thé VRP law will
normally not be applied to sales représentatives who perform their
duties outside France under contracts not governed by French law,77
thus showing a conception of thé law as a spécifie régulation of
activities within thé territory of France rather than thé expression of
a fundamental principle of social order. It has nevertheless been held
that if thé parties to a contract for sales représentation to be per-
formed outside France agrée that French law will govern thé con-
tract, thé VRP law will be applied as part of thé lex contractus.™
The view that thé VRP law may be contractually adopted by thé
parties contrasts with thé position thé courts hâve taken on thé decree
of December 23, I95879 that grants certain rights upon termination,
similar to thé rights secured by thé VRP law, to independent com-
mercial agents who are not covered by thé VRP law because they
are not bound by contracts of service. This decree has been held
inapplicable even where thé contract of agency expressly chose
74
Formerly Code du Travail, Liv. I, Art. zgk et seq.; now found in Code du
Travail, Art. L. 751-1 et seq.
75
Code du Travail, Art. L. 751-59; formerly Liv. I, Art. 290.
76
Etablissements Mokotov v. Semeriva, Cass. soc., December 9, 1960, JCP 1961.
II. 12029.
77
Zanarelli v. Société BSN, supra note 35.
78
Etablissements Maillard v. Hakenberg, Cass. soc., July i 1964, [1965] Clunet
128; Société Lautier Fils v. Carton, Cass. comm., November 9, 1959, [1960]
Rev. Crit. 566, note Simon-Depitre.
79
Decree No. 1345; [1959] Rec. Gén. des Lois (Législation) 637-38.
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French law to govern thé agreement. The reason was that thé
decree requires any commercial agent who claims thé benefit of thé
law to be registered with thé registry in his place of domicile of thé
Tribunal de Commerce,80 and thé courts hâve construed this to
mean that thé decree cannot be applied if thé sales représentative
opérâtes outside France. The général French law with respect to
mandataires, which gives thé principal more scope for limiting his
liability to thé agent upon termination, is therefore applied.81
Another possible example of a loi de police is thé remedy of lésion,
a rescission of a sale of immovable property on thé ground that it
was sold at a gross undervalue.82 The Cour d'Appel of Paris held in
one case that this remedy was directed at maintaining a just price in
thé sale of immovables as an élément of social peace, and that it par-
took of thé nature of ordre public. It drew thé conclusion that even
where thé contract was governed by French law, lésion could not
apply to a sale of land outside France.83 Its reasoning suggests that
thé remedy would be applied to a sale of French land, irrespective
of thé lex contractus. Batiffol, it should be noted, treats this décision
as suspect because it interfères with ordinary choice of law prin-
ciples,84 and indeed has cautioned more generally that too free a use
of thé notion of lois de police would "open thé door to a fragmenta-
tion of solutions, and to a disturbing complexity and unpredicta-
bility."85
The concept of lois de police has most frequently been prayed in
aid when it was sought to apply French law at thé expense of thé
law that would hâve applied on ordinary choice of law principles.
There are a few instances, however, in which courts hâve used loi de
80
Ibid., Art. 4, para. 2.
81
Dame Cipiletti v. Société COFPA, Cass. comm., January 19, 1976, [1977]
Rev. Crit. 503, note Batiffol. See also Noblesse v. Société Haviland, supra
note 52. The Cour d'Appel de Paris has similarly held that French workmen's
compensation législation is applicable only to employées working in France;
it was therefore not available to thé dependents of a deceased airline employée
who performed his duties mostly in Indochina, although thé employee's con-
tract with thé airline was held governed by French law: Veuve Boucher v.
de. d'Assurances La Préservatrice, Cour d'Appel de Paris, March 9, 1961,
[1964] Rev. Crit. 467, note Simon-Depitre.
8
2 C.C. Art. 1674.
83
Vinot v. Villerelle, Cour d'Appel de Paris, February 9, 1931, [1931] Rev.
Crit. 348.
84
2 Batiffol 276, n. 25.
85
Batiffol, "Le Pluralisme, etc.," supra note 73, at 138.
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police as a "bilatéral" concept, one that can resuit in thé displace-

ment of thé ordinarily governing law by a foreign regulatory statute
as well as by a French one. In thé case in which thé Cour d'Appel
of Paris held that thé lease of thé immovable in Algeria was governed
by French law, so determining thé place where, and thé currency
in which, payment of rent was due, thé court added thé significant
proviso that thé lex situs of thé immovable, not thé lex contractus,
would be applied "if thé issue were thé détermination of thé amount
of thé rent and thus thé application of one of thé rules of ordre public
regulating this spécial area of rente."86 In another case, thé same
court held that a Vietnamese law making void any sale of land that
had not been approved by thé relevant government officiais was "a
law partaking of ordre public that was binding on contracting parties
as a loi de police, and whose effects could not be avoided by invoking
thé law selected by thé parties."87 Even if thé sale in thé case before
them had been governed by French law, which was not decided, it
would therefore hâve been void by application of thé lex situs.
Although thé application of thé idea of loi de police by thé courts
has not created anything like an established doctrine, thé subject has
led certain writers to formulate a général theory of lois de police, as
a necessary supplément to thé theory of party autonomy, so that
states with a spécial interest in regulating thé matter in question will
not hâve their législative policies frustrated by thé application of thé
général principle that thé parties to an international contract may
sélect thé law to govern their relations. One, which is an attempt to
subsume lois de police under a more comprehensive category of
rules, is thé theory of "laws of immédiate application," whose
originator is P. Francescakis.88 This theory regards thé application
of a rule of forum law under thé rubric of ordre public or loi de
police as, in effect, a décision that thé rule includes, expressly or im-
plicitly, a supplementary rule about its territorial scope of applica-
tion. This binds thé court to apply thé rule if thé facts bring thé
case within its scope, and displaces conflicts rules of thé ordinary
type — hence thé term "of immédiate application." While perhaps
86
Association Prohuza, supra note 60, at 100.
87
Roux v. Agent judiciaire de trésor, Cour d'Appel de Paris, May 15, 1975,
[1976] Rev. Crit. 690, note Batiffol.
88
P. Francescakis, La théorie du renvoi et les conflits de systèmes en droit inter-
national privé 11-16 (1958); Francescakis, "Quelques précisions sur les 'lois
d'application immédiate' et leurs rapports avec les règles de conflits de lois,"
[1966] Rev. Crit. i.
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bringing some theoretical order to thé muddled areas of ordre public

and lois de police, thé theory is less than explicit on what test should
be used to détermine whether a particular rule is of immédiate appli-
cation,89 and brings with it thé danger of too ready a resort to forum
law by thé courts.90 Moreover, no attempt has been made to extend
thé theory to thé application of foreign laws as well as laws of thé
forum.91
The other theory that should be mentioned is thé one developed
in a récent book by Annie Toubiana.92 She advocates thé élaboration
of thé idea of loi de police into a "bilatéral" concept, applicable to
foreign as well as to French laws, reflecting thé need to give effect
on a sound and methodical basis to regulatory interests of thé various
countries involved in cases of international contracte. She classifies
lois de police into two catégories, those that ought to be applied in
thé place of thé lex contractus determined on ordinary choice of law
principles, and those that ought to be applied cumulatively with thé
lex contractus. In thé former, she includes rules relating to compen-
sation to employées because of breaches of their contracte (such as
thé VRP law), direct actions of accident victims against insurers,
and insurers3 subrogation rights.93 In thé latter category she would
include statutes requiring certain disclosures to be made or condi-
tions to be included in contracte, laws regulating corporations and
societies, anti-trust laws, exchange laws, and monetary législation
on thé discharge of debts.94 She suggests three principles by which
thé application of foreign laws of thèse types, not part of thé lex
contractus, might be justified: (a) thé application to foreign laws
of thé rule in Article 3, paragraph i of thé Civil Code that lois de
89
Francescakis, [1966] Rev. Crit. i at 16, describes thé rules as those that "hâve
this feature in common, that they involve thé organization of thé state (met-
tent en cause l'organisation étatique)." He élaborâtes on this by saying that
conflicts rules should not be allowed to de tract from "thé political, cultural,
social and économie objectives that thé State seeks to implement through thé
structures it créâtes." Ibid., 13.
90
"A formula like [M. Francescakis'] is capable of swallowing up ail laws, be-
cause it is hard to see in what areas one might find laws that do not share
this character." Batiffol, "Le Pluralisme, etc.," supra note 73, at 138. G.
Sperdutti, "Les lois d'application nécessaire en tant que lois d'ordre public,"
[1977] Rev. Crit. 259, also argues for a restrained use of thé concept of laws
of immédiate application.
91
Francescakis, "Quelques précisions, etc.," supra note 88, at 12.
92
Supra note 21.
93
Ibid., 268-97.
9
* Ibid., 297-331.
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police et de sûreté bind ail those who are résident in thé country
— an admittedly vague test, but capable of development ;95 (b) a
rule of thé following type: "In international cases thé court must
apply thé lois de police of thé countries whose socio-économie in-
terests are affected by thé contractual transaction, if thé légal rela-
tionship in question or its effects are localized within thé intended
sphère of application of thèse laws";96 (c) thé projection on to thé
international level of thé lois de police of thé forum.97
This short description, though inevitably oversimplified, shows
that thé tendency in French law may be to work towards a superim-
position of a set of supplementary choice of law rules, relating to thé
state régulation of contracts or their effects, upon thé traditional
framework of choice of law in contracts, rather than towards a
scrapping of that framework altogether. This makes an interesting
comparison, as we shall see, with thé transition in thé United States
from thé First to thé Second Restatement on thé Conflict of Laws.
GERMANY
Whereas French case law is réticent about thé précise method-

ology in choice of law in contract, thé German law is schematic and
exact. For about twenty-five years, courts hâve stated thé choice of
law rules using a formula that almost never varies. It consists of four
stages. Hère is thé statement of thé law given by thé Eighth Civil
Senate of thé Bundesgerichtshof in a décision of September 22, 1971 ;
any number of other cases would do as well.
According to German private international law, in thé area of contract
thé parties to thé transaction are fundamentally free to détermine by
agreement what System of law shall govern their contractual relation-
ship. In this case thé appeal court has not found, and thé parties hâve
not argued before us, that thé parties made such a choice of law by
agreeing on it either expressly or impliedly in thé appropriate terms.
In this situation, according to thé firm line of précèdent laid down by
thé Bundesgerichtshof,98 thé matter is to be decided by thé so-called
hypothetical intention of thé parties in relation to thé law governing
thé contract, and, in cases where such hypothetical intention cannot be
95
Ibid., 254-56.
96
Ibid., 256.
97
Ibid., 258-66.
98
The court cited BGH, ist civ. sen., September 30, 1952, 7 EBGHZ 231, 234;
BGH, ist civ. sen., 9 EBGHZ 221, 223; BGH, 4th civ. sen., March 30, 1953,
17 EBGHZ 89, 92.
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established, thé law of thé place of performance détermines thé rule

applicable to thé particular obligation that is at issue."
This strikingly heterogeneous group of rules is very différent from

thé général tendency in French law to seek a single, all-embracing
choice of law test. Its four components — express choice, inferred
choice, hypothetical intentions, and lex loci solutionis — will be dis-
cussed in turn.
Express Choice of Law

Respect for thé expressed choice of law of thé parties is much
more firmly and deeply rooted in German than in French law. It
dates back at least to Savigny. He saw thé key to thé "seat" of a
relationship of légal obligation, and therefore to thé law that should
apply to that obligation, in thé "forum" where thé obligée could
expect to be able to enforce performance by thé obligor. This forum
depended, in his view, on a "voluntary submission" by thé obligor,
which was generally indicated by a "tacit expression of will." In thé
case of contracts he asserted that thé obligor made this "tacit expres-
sion of will" in favour of thé place where he had undertaken to per-
form; but thé applicability of thé lex loci solutionis, because it was
based on a presumed submission to thé forum and thé law of thé
place of performance, would be displaced by an express déclaration
that thé obligor was submitting to a différent law.100 From its earliest
days in thé iSyo's thé Reichsgericht followed Savigny's precepts. It
would apply thé law thé parties declared, expressly or implicitly, to
be applicable to their agreement, and failing this it would turn to thé
law of thé place of performance of thé obligation in question.101
The latter, as we shall see, could differ from thé lex loci solutionis
for other obligations in thé contract, so that a scission of thé applic-
able law might resuit.
99
BGH, 8th civ. sen., September 23, 1971, 57 EBGHZ 72, 75.
100 p\ von Savigny, A Treatise on thé Conflict of Laws 197-99 (2d éd. Guthrie
trans. 1880). At page 198 he explains: "The forum of thé obligation (which
coïncides with thé true seat of thé obligation) dépends on thé voluntary sub-
mission of thé parties, which, however, is generally indicated, not in an ex-
press, but in a tacit déclaration of will, and is thus always excluded by an
express déclaration to thé contrary. We hâve therefore to inquire to what
place thé expectation of thé parties was directed — what place they had in
their minds as thé seat of thé obligation."
101
O. Sandrock, Zur ergânzenden Vertragsauslegung im materiellen und inter-
nationalen Schuldvertragsrecht 188-92 (1966).
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Cholce of Law in Contract 255
Although thé basic rule of thé primacy of thé parties' intention

was thus established early and constantly reaffirmed, there was a
good deal of debate, similar to that in France, about whether it was
in accord with thé theoretical structure of private international law
that thé parties' choice of law should be treated as per se décisive of
thé applicable law. Suggestions were made, similar to Niboyet's,
that thé parties' choice could only be thé exercise of thé contractual
freedom left to them within thé framework of mandatory rules of
thé law that, on objective principles, had to govern thé contract.
The distinction was expressed by thé terms materiellrechtliche Ver-
weisung (choice seen merely as a fact in thé case, not determining
thé law to be applied) and kollisionsrechtliche Verweisung (choice
seen as determining thé law to be applied).
Neumann proclaimed in 1930, for example, that "With a few
exceptions . . . there is unanimity among scholars for thé proposition
that thé choice of governing law by contracting parties is possible
only within thé bounds set by thé relevant légal System and that thé
essential validity of a contract, which is a matter wholly subject to
mandatory légal rules, cannot be determined by an agreement of
thé parties."102 There were a few statements by thé Reichsgericht
that supported this thesis,103 but thèse could be explained on thé basis
that they either concerned thé incorporation of foreign légal rules as
distinct from a sélection of governing law, or were obiter dicta.104
In 1931, however, Haudek deplored thé extent to which académie
theory in this matter had ignored thé overwhelming current of judi-
cial opinion that a choice of law by thé parties was a sélection of
governing law that thé conflicts rules of thé forum recognized as
effective.105 If thé problem was thé possibility that thé parties might
sélect a law without connection with thé agreement, thé solution,
according to Haudek, was to limit thé range of laws from which they
might choose, not to pervert thé private international law laid down
by thé courts by denying that on certain matters thé parties had a
choice of law.106 Thus, owing to thé more explicit position of thé
courts, thé theoretical objections to party choice never enjoyed as
widespread assent in Germany as they did in France.
102
K. Neumann, Vertragsgûltigkeit und Parteiwille in Lehre und Rechtsspre-
chung des internationales, Schuldrechts 145 (1930).
103
Ibid., 85-89.
104
W. Haudek, Die Bedeutung des Parteiwillens im IPR 48-50 (1931).
"s Ibid., i.
*<* Ibid., 19.
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The more récent writers hâve tended to accept without reserve

thé parties' express or implied agreement on a choice of law as
directly determining thé applicable law according to German con-
flicts rules. Sortie hâve argued vigorously against any limitation on
this principle, on thé ground that whatever limitation is selected —
making a list of thé contacts with a country that will permit a choice
of its law ; insisting on a more général test such as a substantial con-
nection with thé country — leads to arbitrary restrictions on thé
choice of law that are incompatible with thé complex nature of con-
tracts, and with thé highly divergent situations in which a choice of
law may be appropriate and désirable.107 Thèse writers still concède,
however, that a finding of mala fides in thé choice of law, or an in-
tent to évade a law that otherwise would clearly apply, might be
made grounds for refusing to give effect to thé choice.108 Some
writers would also except "purely domestic" cases from thé parties'
freedom of choice.109 Among thé authors of treatises, Raape now
favours — contrary to thé views he expressed in some earlier édi-
tions110 — unrestricted freedom of choice,111 whereas Kegel asserts
thé requirement that thé parties must be able to show some reason-
able interest in having thé chosen law govern their relations.112
According to thé latter writer, even if there is no such interest, thé
parties' choice can still function as an incorporation, if drafted in
appropriate terms.113 In any case, where limitations hâve been sug-
gested, they are put forward on grounds of principle rather than
précèdent. No case has yet been reported in which thé parties'
choice was rejected.114
107
Gamillscheg, "Rechtswahl, Schwerpunkt und Mutmasslicher Parteiwille im
Internationalen Vertragsrecht," 157 Archiv fur die Civilistische Praxis 303
(*958); Mann, "Die internationalprivatrechtliche Parteiautonomie in der
Rechtssprechung des Bundesgerichtshofs," [1962] Juristenzeitung 6.
108
Gamillscheg, supra note 107, at 308.
109
R. Moser, Vertragsabschluss, Vertragsgûltigkeit und Parteiwille im Inter-
nationalen Obligationenrecht 200 (1948); Gamillscheg, supra note 107, at
3i3-
110
L. Raape, Internationales Privatrecht 284-85 (sd éd. 1950).
111
L. Raape, Internationales Privatrecht 460-62 (sth éd. 1961).
112
G. Kegel, Internationales Privatrecht: Ein Studienbuch 290 (4th éd. 1977) ;
7 Soergel-Siebert, Kommentar zum Bûrgerlichen Gesetzbuch 114 (éd. G.
Kegel) (hereinafter Soergel-Kegel).
113
Soergel-Kegel 114.
114
Soergel-Kegel cites at 114 one case, in which two résidents of Saxony made
a marriage brokage contract, unenforceable under Saxon law, and included
an express choice of law in favour of Prussian law and a choice of forum in
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There hâve, however, been several cases that hâve discussed thé
problem of whether thé parties' choice of law ought to be held
ineffective because thé application of thé chosen law would mean
thé parties would escape from thé mandatory provisions of another
law closely connected with thé contract. The leading case on thé
point is thé celebrated "Ruble case,"115 in which one Russian citizen
borrowed certain funds from another in Soviet Russia in February
1920, and undertook to repay thé loan from his account at a bank
in New York, or in any case to repay in U.S. dollars. This agree-
ment was illégal under thé Soviet currency law then in force. The
parties, however, both intended to fiée thé Soviet Union. They even
backdated their agreement to September 1917. The debtor eventu-
ally came to live in Germany, where in 1923 thé créditer brought
action for repay ment of thé loan. The Reichsgericht held that thé
validity of thé agreement was unaffected by thé relevant Soviet cur-
rency laws, despite thé fact that thé case was virtually "internai" to
thé Soviet Union. The only foreign éléments were thé respective
intentions of thé parties to leave thé country. The court justified its
conclusion by citing thé fact, which was abundantly clear, that thé
parties did not intend Soviet law to govern their agreement. Al-
though thé parties had no other law particularly in mind (except
possibly thé law of New York), their négative intention with respect
to Soviet law was sufficient to prevent thé latter from being applied.
The court, having rejected that law, turned to thé law of thé place
of performance, which they held to be thé law of whatever country
thé debtor decided to settle in after his flight from thé Bolsheviks.
The parties presumably intended, thé court said, that thé debtor
would be sued there, and that thé local law would therefore be ap-
plied. The applicable law was therefore German. The Fifth Civil
Senate said:
Even when by means of this choice thé parties évade a mandatory law
of their own country or intend to prevent its application to their agree-
ment, such motives on thé part of thé parties are no ground for thé
favour of Berlin in an effort to make it enforceable. The Reichsgericht

(44 ERGZ 300) held thé contract void, but thé grounds used were that thé
parties' agreement merely incorporated Prussian law as a set of contractual
terms, and that thus thé applicability of Saxon law was unaffected. The court
did, however, utter dicta to thé effect that contracting parties could not
avoid mandatory rules of law by a choice of law clause — a theory that has
clearly been rejected since. See infra notes 115-19 and accompanying text.
115
RG, 5th civ. sen., October 3, 1923, 108 ERGZ 241.
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German judge to deny that their choice of a place of performance

should hâve its ordinary légal conséquence, namely, thé application of
German law; there is in such a case no contravention of any légal pro-
hibition that is binding on thé German judge (Article 134 BGB), be-
cause thé only such prohibitions that are binding in this way are those
contained in domestic law; neither does giving effect to a juridical act
in thèse circumstances offend against fundamental moral principles
(Article 138 BGB) because, although a foreign law is thereby being
evaded, that foreign law is not supported by légal and moral considéra-
tions that are common to ail civilized countries, but only by économie
and socio-political principles (hère those of state socialism) that differ
from those to which German law gives expression.116
Given thé âge of this case, and thé hint in thé last sentence just
quoted that thé foreign law was regarded to some extent at least as
contrary to ordre public, we might hâve doubts about whether it lays
down a principle that has any vitality today. Recently, however, thé
case has been invoked in quite a différent context, in a way that
suggests thé Bundesgerichtshof is still inclined to attach little con-
séquence, in judging thé validity of a choice of law by thé parties,
to an intent to évade some other law. The plaintif! in thé récent case
was owed a retirement allowance by a German limited partnership,
whose principal partner was one M, and which had been acquired
by a Dutch company effectively owned by thé défendant. The de-
fendant's company assumed M's liability for thé partnership's debts,
and in addition thé défendant gave his personal guaranty to thé
plaintiff that his company would pay thé plaintifPs retirement allow-
ance. The guaranty contained thé clause, "Place of judicial jurisdic-
tion is Dûsseldorf. German law shall apply." After thé plaintiff
sought payment in vain from thé partnership, from M and from thé
defendant's company (which by this time was insolvent), he sued
thé défendant on thé guaranty. The defence raised was that under
Dutch law thé guaranty was invalid because thé defendant's wife
hàd not consented to his giving it. The Eighth Civil Senate refused
to apply thé provisions of Dutch law that thé défendant relied on,
because he had stipulated that German law governed thé guaranty.117
Referring, inter alia, to Kegel,118 it pointed out that thé défendant
116
Ibid., 243-44.
117
BGH, 8th civ. sen., November 15, 1976, [1977] NJW ion, note Jochem.
The court therefore characterized thé issue as one of thé substantive validity
of thé contract, rather than (as Jochem, in his note, suggests it should hâve
done) as a law protective of thé family, to be applied as thé obligeras per-
sonal law by analogy with Art. 14 EGBGB.
118
Soergel-Kegel ni.
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had had an interest in thé guaranty's being subject to German law.

It said further:
In addition, it is no objection to thé application of German law to thé
defendant's contract of guaranty to say that thé défendant has misused
his choice of law, because citizens of another country, who réside in that
country and make a contract there, may agrée that a foreign law —
German, in this case — shall govern their contract, even where by this
means they évade thé mandatory rules of their own country's law. Such
attempts at évasion generally afford no ground on which thé German
judge can deny its normal effect to an agreement that German law
shall apply [citing thé Ruble case].119
It should be noted finally that in an earlier case, thé Bundes-
gerichtshof considered thé possibility that a sélection of Dutch law in
a contract between a Dutch company and its German sales repré-
sentative was invalid because it sought to avoid thé application for
thé representative's benefit of thé German équivalent of thé VRP
law in France.120 The représentative in that case relied on Article
134 of thé BGB, which provides that "Any juridical act that contra-
venes a prohibitory rule of law is void, unless it is justified according
to some other rule of law." The court accepted that if thé case had
been a wholly domestic one without any connections with other
countries and thé parties had selected a foreign law and forum for
reasons of evading German law, Article 134 might well hâve applied.
Hère, however, there were ample connections with The Netherlands
to justify a choice of Dutch law, even if thé choice was made with
thé conscious intention of avoiding thé application of thé German
"VRP" law.121 The case shows that an evasive intent will not by
itself taint an otherwise justifiable choice of law — justifiable, that
is, in terms of thé interests of thé parties — and that, as thé court
stressed,122 thé Bundesgerichtshof is reluctant to expand its rather
narrow définition of ordre public.
The virtually unqualified support that thé principle of party
autonomy with respect to choice of law has found in thé Reichs-
gericht and thé Bundesgerichtshof is not wholly shared by thé récent
German statute on thé law of standardized contractual terms (AGB-
Gesetz) ,123 This statute applies, subject to some major exceptions, to
119
Supra note 117, at 1012.
120
BGH, 7th civ. sen., January 30, 1961, [1961] NJW 1061.
121
Ibid., 1062.
122
Idem. See infra note 182 and accompanying text.
123 Law Of December 9, 1976.
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ail contractual terms that hâve been drafted in advance for a multi-
plicity of contracts, and are presented for acceptance by one party to
thé other at thé tirne of contracting.124 It provides, as part of a list
of terms that are prima facie invalid but that may be held valid if
it is found équitable to do so, that a clause is presumptively invalid
if it amounts to "a choice of law in favour of foreign law or thé law
of thé DDR in cases in which no reasonable interest for such a
choice exists."125 What is such a "reasonable interest" is left for judi-
cial détermination. The drafting of thé AGB-Gesetz conforms in this
respect to Kegel's position that thé général private international law
requires a "reasonable interest" to be présent for a choice of law by
thé parties to be sustained.126 Kegel suggests that in most, but not
necessarily ail, wholly "domestic" cases thé parties hâve no such
interest.127 The expression used by him and by thé AGB-Gesetz —
"anerkennenswertes Interesse" — makes it clear that thé interest in
question is not merely one that is reasonable in thé sensé of being
rational from thé parties' point of view, but in addition must be an
interest worthy of récognition by thé law. A choice of law inserted,
with thé complète agreement of thé parties, for thé purpose of avoid-
ing some provisions of a law that might otherwise apply might be
rational on their part but inappropriate in thé eyes of thé court, and
therefore would not embody an "anerkennenswertes Interesse." The
generous view that courts hâve taken in thé past of thé propriety of
using choice of law clauses to évade uncongenial légal rules may
mean that this notion of "reasonable interest" will also be given a
wide reading.
The problematical use of party choice to combine two or more
sets of laws, or to "freeze" thé chosen law so as to préserve its appli-
cation in thé form it had at a certain time, both figured in a case
that came before thé Reichsgericht in ig36.128 It concerned U.S.
dollar bonds issued in New York by a German borrower in 1926.
124
S. 1 ( 1 ) . There is an exception in s. 1 ( 2 ) for contracts in which thé terms
were subject to individual negotiation by thé parties. The other exceptions
include contracts in thé areas of labour, succession, family, and company law
(s. 2 3 ( 1 ) ) , and contractual terms agreed to by merchants, if thé contract
was made within thé scope of their business (s. 24, para, i ), and terms agreed
to by public agencies like thé post office or thé government railways (s. 24,
para. 2). See Kegel op. cit. supra note 112, at 296-97.
125
AGB-Gesetz, s. 10, no. 8.
126
Supra note 112 and acompanying text.
127
Kegel, op. cit. supra note 112, at 290.
128
RG, 4th civ. sen., May 28, 1936, [1936] JW 2058.
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The bonds were made subject to thé terms of a trust indenture by

which a German and an American firm were made trustées for thé
enforcement of thé bondholders' right against thé borrower. The
indenture provided that ail thé rights and remédies to which thé
bondholders were entitled should be governed by thé laws of New
York, except that thé rights of thé trustées and thé bondholders with
respect to certain municipal bonds that were to be deposited as
security for thé loan should be governed by German law. The dollar
bonds contained a gold clause providing for payment in gold cur-
rency of thé United States, based on thé standard weight and fine-
ness existing in February 1926. Certain German bondholders now
claimed payment according to thé gold clause. The borrower relied
on thé Joint Resolution of Congress of June 5, 1933 that had made
gold clauses invalid for U.S. dollar obligations. The bondholders
argued, inter alia, that thé choice of New York law in thé bonds and
trust indenture was meant to be exclusive of any future law chang-
ing thé value of thé American dollar.
The Reichsgericht rejected this argument both on thé interpréta-
tion of thé agreement and on principle. It stated thé argument on
principle as follows:
Parties may always agrée that one aspect of their légal relationship shall
be governed by one légal System and another aspect by a différent sys-
tem, so long as under thé relevant circumstances they hâve adéquate
reasons for such a divided choice of law. Therefore thé déclaration in
thé trust indenture, that thé rights of thé trustées and thé bondholders
with respect to thé municipal bonds deposited as security shall be
governed by German rather than by American law, is unobjectionable
under German conflicts principles. However, once an obligation is
governed by a given country's légal System, thé parties may not agrée
to exclude thé application of an existing or an anticipated future law
dealing with a particular issue, unless that rule is just a facultative
one whose exclusion would therefore not be inconsistent with thé sub-
mission to thé législative authority of thé state in question. Only a com-
plète submission to thé lawmaking power of some state gives thé assur-
ance, which is as necessary in private international law as it is elsewhere,
that thé obligation will be regulated in thé général interest, as reflected
in thé légal principles that are common to civilized countries, to restrain
thé pursuit of self-interest by thé economically stronger party, or by both
parties, as thé case may be.129
The Joint Resolution was therefore applicable to thé bonds as an
intégral part of thé légal System thé parties had chosen. In thé resuit,
129
Ibid., 2059.
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however, thé Reichsgericht held thé gold clause operative in a way

that resembles in some respects thé Cour de Cassations attitude to
thé gold clause in thé Messageries Maritimes case fourteen years
later. The Reichsgericht held that thé United States law invalidating
thé clause could not be allowed to affect thé relations between a
German debtor and a German créditer, because to give it such
effect would, contrary to Article 30 of thé BGB (to be discussed
below), interfère with thé working of German law, which, especially
since thé advent of National Socialism, had been directed at creating
confidence in financial matters by upholding thé security of debts
and countering thé effects of spéculation. The court's application of
Article 30 to this case was criticized at thé time, especially because
its appeal to thé policy of thé nation was made to look unconvinc-
ing soon afterwards, when a government decree specifically man-
dated thé récognition of foreign laws of dévaluation in connection
with ail foreign currency debts.130
This case shows that, so far as thé German courts are concerned,
when thé parties choose a law to govern their contract they choose
it for better or for worse. This relates to another theoretical prob-
lem : should a choice of law by thé parties be given effect where thé
resuit is to make thé contract void? Batiffol, among others,131 sug-
gests that to hold a contract void in thé name of party intention,
when thé parties clearly intended to make a valid agreement, is self-
contradictory.132 The German courts, however, hâve not hesitated
to do so. In one case, for example, thé parties' choice of a German
forum for thé litigation of any disputes arising out of their agree-
ment, which they had made in Germany, for thé sale of certain land
in Spain, was held to be an implied choice of German law; this
bound them to observe thé German requirements as to form.133
Thèse had not been met, so thé agreement was invalid, although it
would hâve been formally valid according to Spanish law.
130
Ibid., 2061 (note by Mugel).
131
Including thé Second Restatement: s. 187, comment e.
132
2 Batiffol 241.
133
BGH, 5th civ. sen., August 4, 1969, [1969] NJW 1760. Matters of form of a
juridical act are, by Art. 11 ( i ) EGBGB, to be decided according to thé law
governing thé substantive validity of thé juridical act, or, alternatively, by
thé law of thé place where thé act is donc. (The second alternative is ex-
cluded for acts transferring title to property : Art. 1 1 ( 2 ) . ) Because of thé
choice of law in this case, both alternatives pointed to German law.
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Inferred (Stillschweigend) Intention of thé Parties

Although in many cases this second part of thé German choice of
law scheme is hardly distinguishable from thé third, hypothetical
intention, a few catégories of cases clearly fall within thé description
of an actual, but implicit choice of law by thé parties. Foremost
among thèse is a choice of an exclusive judicial or arbitral forum,
which has almost invariably134 been held to imply a choice of thé
local law of thé country where thé court sits or where thé arbitration
is to be held.135 Whether thé choice of forum clause has been in-
cluded in thé contract may sometimes be at issue, for example,
where thé clause was included in a seller's invoice sent with goods
sold. In such a case thé courts hâve decided that issue by applying
German law, apparently as lex /on',136 although there is some support
for judging thé choice of forum clause itself as an agreement subject
to private international law rules, so that its validity may be judged
by a foreign law.137 Other instances of implied party intention are
références to provisions of a certain légal System, thé use of stan-
dardized terms drafted with a view to a particular System, and thé
référence to another contract that contains a choice of law clause.138
In practice by far thé most important form of implied agreement
as to thé law to be applied is thé failure to plead foreign law in thé
earlier stages of légal proceedings. This is usually characterized as
an implicit, post-contractual agreement to make German law thé
governing law,139 although it is occasionally also treated as évidence
that German law was intended to apply at thé time thé contract was
made.140 In thé common law, where foreign law is treated as a ques-
tion of fact, a failure to plead it simply leads to thé application of
134
Some exceptions are cited by Soergel-Kegel, at 118, n. 43.
135
E.g. BGH, 5th civ. sen., August 4, 1969, supra note 133; BGH, 8th civ. sen.,
August i, 1964, [1964-65] IPRspr 136; BGH, yth civ. sen., March 15, 1962,
[1962-63] IPRspr 107.
136
BGH, 8th civ. sen., May 7, 1969, [1968-69] IPRspr 60; BGH, 8th civ. sen.,
October 19, 1960, [1961] NJW 25.
137
BGH, 7th civ. sen., February 29, 1968, 49 EBGHZ 384; contra, BGH, 7th
civ. sen., January 30, 1961, [1961] NJW 1061, which treats thé choice of
forum as a procédural issue to be judged by lex fort on that account.
138
Soergel-Kegel 117.
139
BGH, 8th civ. sen., April ai, 1971, [1971] IPRspr 49; BGH, 8th civ. sen.,
March 27, 1968, 50 EBGHZ 32; BGH, 8th civ. sen., March 7, 1962, [1962]
NJW 1005.
140
BGH, 7th civ. sen., November ai, 1960, [1960-61] IPRspr 116.
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264 The Canadian Yéarbook of International Law 1978
lex fori because of thé légal presumption that if no foreign law is

proved, it is assumed to be thé same as forum law. In Germany,
however, thé trier of fact is not only able, but generally bound to
conduct his own researches into foreign law if he believes it is applic-
able.141 This seems to be thé reason why a failure to plead foreign
law is classified, with some artificiality, as a substantive agreement
by thé parties; it makes German law applicable as thé chosen law,
and thus relieves thé court of thé duty to investigate foreign law,
whereas a failure to plead foreign law per se would not hâve that
efîect. The rule can also work in thé converse situation: if both
parties base their arguments at first instance exclusively on provisions
of foreign law, thé court will interpret that as an agreement that
foreign law applies as thé lex contractus.1*2 A court is not bound to
find an agreement in faveur of German law or foreign law when-
ever thé parties hâve failed to refer specifically to any other. The
totality of thé facts of thé case, including thé parties' behaviour
during thé litigation, must lead to thé conclusion that thé parties not
only assumed that thé law in question would apply, but intended
that it should.143
Hypothetical Intention
This and thé next part of thé German choice of law scheme are
its most distinctive features. The concept of thé parties' "hypotheti-
cal intention" was an innovation undertaken by thé Reichsgericht,
and later modified significantly by thé Bundesgerichtshof. For Sa-
vigny and thé Reichsgericht in its early days, as we hâve seen,144
thé alternatives were limited to thé law actually chosen by thé parties,
explicitly or implicitly, and thé law of thé place of performance.
Around thé turn of thé century, however, thé Reichsgericht began
to recognize an intermediate class of cases, in which a "presumptive"
sélection of law by thé parties excluded resort to thé lex loci solu-
tionis. This presumed choice of law was inferred from thé circum-
stances of thé case.
141
ZPO Article 293; Kegel op. cit. supra note 112, at 227-28. The appeal court
may generally not review thé findings of foreign law made by thé court of
first instance: ZPO Art. 550.
142
BGH, 8th civ. sen., November 29, 1961, [1960-61] IPRspr 134; BGH, 6th
civ. sen., March 30, 1976, [1976] NJW 1581.
143
Soergel-Kegel 118.
144
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In 1908, for example, a charterparty between German charterers

and English shipowners, executed in England, in English form, for
a voyage from a Spanish port to a port in France, was held to be
governed by English law, not by thé law of thé port of discharge as
lex loci solutionis. The court said that thé parties could not hâve
intended that French law, foreign to both of them, should apply to
their agreement, and it pointed to thé fact that thé contract was in
an English form.145 The court stressed that determining thé intention
as to what law should govern was "not so much concerned with
finding what thé actual intentions of thé parties were, but rather
with deciding what thé parties, taking ail of thé circumstances rea-
sonably and fairly into account, would presumably hâve decided
with respect to thé applicable law if they had addressed their minds
to thé question."146 The primary reason for taking this approach,
thé court said, was thé undesirability of having two laws apply to a
single contract,147 which (as we shall see in thé next section) was
thé usual resuit in applying thé law of thé place of performance,
where thé parties to thé contract were from différent countries. The
Reichsgericht continued to develop this technique until World War
II, but constantly kept in reserve thé application of thé lex loci solu-
tionis (or leges locorum solutionis} as a last resort if thé détermina-
tion of thé parties' presumed intention was impossible because thé
factors in thé case appeared to thé court to be evenly balanced be-
tween thé légal Systems in question.148
After World War II, thé Bundesgerichtshof introduced an impor-
tant change into thé formula — important verbally, at least, though
there is considérable debate about whether it has had a significant
impact on thé way thé formula is applied. The occasion for this
change was a case of thé same kind that prompted thé Cour de Cas-
sation to introduce thé term "localization" into its jurisprudence:
thé split of what was a single monetary area at thé time of contract-
ing into two areas with différent currencies while thé debt was out-
standing. The Reichsgericht had had a couple of cases involving
145
RG, ist civ. sen., April 4, 1908, 68 ERGZ 203.
146
Ibid., 205.
147
Ibid., 207.
148
Sandrock, supra note 101 at 194-95. F°r application of thé test of thé parties'
presumed intention, see RG, ist civ. sen., September 19, 1923, 107 ERGZ
i 2 i ; RG, 7th civ. sen., January 27, 1928, 120 ERGZ 72; RG, ist civ. sen.,
November 24, 1928, 122 ERGZ 316; RG, sd civ. sen., March 20, 1936,
151 ERGZ 193; RG, 2d civ. sen., June 17, 1939, 161 ERGZ 296.
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a66 The Canadian Yearbook of International Law 1978
debts in Reichsmarks created in German colonies before they were

taken over by thé British, and therefore had their currencies changed,
after World War I. It had been able to dispose of thèse cases on thé
basis of thé parties' having left thé colonies before thé new currency
laws took effect there, thus taking themselves beyond thé reach of
thé new laws.149 Such a solution was obviously impossible in a 1952
case150 in which both thé debtor and thé créditer of an amount
originally lent in Reichsmarks were still in Germany when, in 1948,
thé Reichsmark was replaced by thé Deutschmark for West Ger-
many and thé "Ostmark" for East Germany. The two currencies
were at parity with each other but thé authorities of thé two zones
had decreed différent conversion rates for their respective currencies
when converting from Reichsmarks. The parties were both résident
in what became East Berlin, when thé debt was created; by thé time
of thé currency split they had both moved to West Germany, where
thé action was brought. The First Civil Senate of thé Bundesgerichts-
hof held that thé applicable conversion rate was that decreed in
West Germany. The court pointed out that thé Reichsgericht's test
of "presumed intention" could not be applied without modification,
because thé parties could not hâve known when contracting that
German law would be split into two. It continued :
A new Connecting factor [Anknùpfungspunkt] must therefore be found.
... Since an express or implied intention of thé parties is normally inap-
plicable in thèse cases, thé so-called presumed (hypothetical) party
intention must be brought into play. But that intention is, when prop-
erly considered, not really a matter of finding thé hypothetical subjec-
tive expectations of thé parties, but of a reasonable weighing of inter-
ests assessed in an entirely objective way.151
The resuit of this balancing, it said, was for thé judge to détermine
on thé basis of thé facts as they stood at thé time of thé currency
split; thé resuit hère was that thé respective résidences of thé parties
in West Germany clearly outweighed thé fact that thé debt was
created and was originally intended to be paid in what later became
thé Eastern Zone.152
149
RG, ist civ. sen., September 19, 1923, 107 ERGZ 121; RG, 4th civ. sen.,
December 8, 1930, 131 ERGZ 41.
150 BGH, ist civ. sen., February i, 1952, [1952] NJW 540. The report in 5
EBGHZ 35 does not include thé judgment on thé point in question.
!5i Ibid., 541.
152
For a similar case, see BGH, 4th civ. sen., Mardi 30, 1955, 17 EBGHZ 89,
where thé balance was found to be in faveur of E. Germany.
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The Bundesgerichtshof's "weighing of interests" formula has since

been applied to ail cases where a choice of law had to be made by
thé court. The phrases "hypothetical intention" and "presumed in-
tention" are now used interchangeably, writers generally preferring
to use thé former.153 For ail thé emphasis on thé "objectivity" of thé
"weighing of interests" in thé formula, however, thé précise manner
in which thèse interests are to be found and weighed has never been
made clear. In many cases, in fact, thé Bundesgerichtshof has, while
repeating thé formula, not sought to itemize any relevant "interests."
It has contented itself instead with summarizing thé factual connec-
tions with différent jurisdictions and stating its conclusion in terms
of thé "centre of gravity" (Schwerpunkt]) of thé contract.
Where "interests" hâve been identified individually, they hâve
been thé interests of thé parties, not those of thé states with which
thé contract and thé parties are connected. An example can be found
in a récent case154 in which an action was brought in contract and
delict for thé wrongful death of two German professors who were
killed in thé crash of a Turkish airliner at Ankara. The deceased had
bought their tickets from a German travel agency for a flight on thé
Turkish airline from Cyprus to several Turkish destinations, includ-
ing Ankara. Turkish law required a showing of fault. The court said:
[T]he applicable law must be found, on thé basis of thé "hypothetical
intention of thé parties," by determining which System of law thé parties
would hâve selected if they had concluded an agreement on this point
[authorities cited]. On this basis Turkish law would be applicable as
thé System of law that, so far as thé relevant interests are concerned,
has thé closest connection with thé subject-matter of thé agreements.
Both thé destination of thé flight and thé location of thé defendant's
principal place of business point to thé defendant's own law. Other pos-
sible Connecting factors in this case are of lesser weight. That includes
thé place of contracting, relied upon in thé Revision as thé décisive
factor.. .. The appeal court correctly noted that deciding thé case
according to thé law of this place, which was in thé Fédéral Republic
... would be completely fortuitous, and would be contrary to thé
interests of thé défendant in having thé claims of ail thé passengers on
this flight dealt with on thé basis of thé same System of law, a System
with which thé passengers could not well hâve refused to hâve anything
to do.155
153
Raape, op. cit. supra note 111, at 473 et seq.\ Kegel, op. cit. supra note 112,
at 1292 et seq. (Kegel explicitly rejects "presumed" (mutmasslich) because it
means thé opposite of "certain" (sicher) rather than thé opposite of "actual"
(real), which is "hypothetical." Jbid., 292.)
154
BGH, 6th civ. sen., Mardi 30, 1976, [1976] NJW 1581.
155
Ibid., 1582.
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The Sixth Civil Senate's words show that thé "objectivity" of thé
hypothetical intention formula is not carried to thé extent of barring
from considération thé subjective needs of thé parties to thé agree-
ment. On thé contrary, thé interests of thé airline in a uniform légal
solution for ail thé passengers on thé fatal flight are made a principal
reason for deciding in favour of thé airline's own law instead of that
of thé plaintiffs and thé deceased. Kegel has sought to put this kind
of approach on a systematic basis by suggesting a principle of "mini-
mum inconvenience" (geringsten Stôrung). "Most often thé law is
applied that favors thé party with thé greater interest in thé choice of
law, because that party would be more adversely affected by thé
application of thé other party's law than thé other party would be
affected by thé choice of thé law of thé party with thé greater
interest."156 Factors to consider in deciding this question, he adds, are
whether one party is stronger than thé other (e.g., a party that is able
to use standard form contracts), whether one party exercises a pro-
fession regulated by law (e.g., lawyers), whether one party performs
a commercial service or undertakes a spécial responsibility as opposed
to thé simple obligation to pay money.157 Each of thèse parties,
according to Kegel, would be affected to a greater extent by having
an unf amiliar law applied to his agreements than thé person — thé
customer or client — with whom he deals. Kegel's remarks hâve
been referred to with approval by thé Fourth Civil Senate of thé
Bundesgerichtshof.158 There is also authority for a presumption that
a few classes of contracting parties, including lawyers159 and com-
mission agents160 contracting with their respective clients, make agree-
ments subject to thé law of thé country where their services are to be
performed. On thé other hand thé court has held in discussing this
kind of analysis, that any presumptive weight attached to thé law of
thé seller is displaced if thé seller acts through an agent in thé cus-
tomer's home country.161
156
Kegel op. cit. supra note 112 at 293 (emphasis in thé original); see also
Soergel-Kegel 121.
157
Soergel-Kegel 121.
158
BGH, 4th civ. sen., September 19, 1973, 61 EBGHZ 221.
159
BGH, yth civ. sen., October 28, 1965, 44 EBGHZ 183 (date there incor-
rectly given as October 18; see [1964-65] IPRspr 165).
160 BGH, 2d civ. sen., November 23, 1964, [1964-65] IPRspr 141.
161
BGH, 2d civ. sen., November 16, 1972, [1972] IPRspr 27. See also BGH,
8th civ. sen., November 19, 1962, [1962-63] IPRspr 68; BGH, 7th civ. sen.,
November 25, 1957, [1956-57] IPRspr 103.
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Choiee of Law in Contract 269
In thé greater part of thé cases decided by thé Bundesgerichtshof

on thé basis of hypothetical intention, there is, as noted earlier, no
attempt to identify thé interests at stake but little more than a listing
of thé various éléments in thé case, such as places of negotiation, of
contracting, of résidence of thé parties, of performance, thé ternis of
thé contract, and so on, and thé summary conclusion that thé
"centre of gravity" or thé "presumed" or "hypothetical" intention
of thé parties indicates this or that law.162 The process most closely
resembles thé English "closest and most real connection" method for
fixing thé proper law of a contract, to be discussed below.
One important question, which was mentioned earlier, is thé
extent to which thé Bundesgerichtshof's emphasis on an objective
weighing of thé relevant interests really differs from thé Reichs-
gericht's more subjective formula, based on what law thé parties
would hâve chosen if they had considered and agreed on thé matter.
The quotation given above from thé Turkish airline case shows thé
court still citing thé older formula along with thé new expression,
"hypothetical intention,"163 which suggests that thé change has been
little more than verbal. Some authors, in fact, argue that any change
from thé older notion to a more strictly objective test, in thé sensé
of one that focuses on physical contacts, is to be resisted.164 They
urge that thé test's function is to accommodate thé décision on thé
choice of law issue as well as possible to thé individual requirements
of thé parties to thé contract, and that too much stress on thé "ob-
jectivity" of hypothetical intention might mislead thé courts into
assuming that only "tangible" Connecting factors, like thé places of
negotiation, of contracting, of performance, and of payment, were
entitled to considération. Other factors, wholly abstract and related
to thé particular situation of thé parties, are in their view equally
relevant to a proper décision: whether thé parties would definitely
not want a certain law to apply165 or whether one of thé laws would
162
Some examples: BGH, ist civ. sen., June 18, 1971, [1971] NJW 2 1 2 ; BGH,
8th civ. sen., May 7, 1969, [1968-69] IPRspr 60; BGH, 8th civ. sen., February
10, 1969, [1968-69] IPRspr 57; BGH, 8th civ. sen., June 26, 1968, [1968-
69] IPRspr 56; BGH, 7th civ. sen., November 25, 1963, [1962-63] IPRspr
87.
163
Raape, op. cit. supra note n i , at 474, defines hypothetical intention thé
same way.
164
Gamillscheg, supra note 107, at 328-30; Mann, supra note 107.
les Which thé court took into considération in BGH, ist civ. sen., December
19, 1958, [1958-59] IPRspr 177.
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270 The Canadian Yearbook of International Law ig?8
invalidate thé agreement.166 The freedom with which thé Bundes-

gerichtshof mixes thé language of intent with that of objective
weighing of interests suggests that there is little danger that hypo-
thetical intention will be over-objectified in thé way thèse writers
fear.167
Place of Performance
This part of thé German choice of law System is, in thé strict sensé
of thé word, an anachronism. The concept of hypothetical intention,
of finding thé centre of gravity of thé contract taking into account
ail thé circumstances, is capable of resolving any choice of law issue
with respect to thé substantive validity of contracts, where thé parties
hâve not indicated their intention to sélect a governing law. The
test is sufficiently flexible that it need never lead to a deadlock
between two possible laws on thé ground that ail thé factors are
demonstrably equally balanced either way. Yet thé German courts
hâve constantly reiterated thé principle that thé law of thé place of
performance is to be applied as a last resort if no intention of thé
parties can be found.
This position was easily explained in thé context of thé Reichs-
gericht's early view168 that thé only relevant intention was one
actually expressed by thé parties, because that left many, probably
most, cases in which thé parties' intention could not be established.
As, however, thé Reichsgericht and thé Bundesgerichtshof hâve
broadened thé concept of intention to include an objective assess-
ment by thé court of thé "presumed" or "hypothetical" intention of
thé parties, thé scope left for thé law of thé place of performance has
become more and more attenuated, until now it is difficult to see any
justification for resort to an arbitrary rule so totally at odds with thé
other tests that German law uses. Its arbitrariness is enhanced by
thé fact that thé courts, following thé teachings of Savigny,169 hâve
maintained that thé several obligations arising out of a single con-
tract must be judged individually by thé laws of their respective
places of performance, so that if one party performs services in
country A and thé other pays him in country B, thé obligation to
166
Gamillscheg, supra note 107, at 329.
167
In addition to thé Turkish airline case, supra note 154, see BGH, 8th civ.
sen., October 19, 1960, [1960-61] IPRspr 109.
168
169 p1 von Savigny, supra note 100, at 195, 222-23.
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perform is governed by thé law of A but thé obligation to pay by

thé law of B. This theory has meant in turn that fine distinctions
hâve had to be drawn with respect to \vhether a particular issue
relates to one obligation or another; does a buyer's right to refuse
payment for non-conforming goods, for example, relate to thé seller's
obligation to supply conforming goods or to thé buyer's obligation
of payment?
The continued attachment of German private international law
to thé law of thé place of performance and its attendant complica-
tions does not lack critics,170 but thé Bundesgerichtshof has continued
to apply thé lex lad solutionis rule from time to time. Nearly ail of
thé cases in which it has donc so hâve involved contracts for thé
sale of goods,171 largely because of thé proposition, repeated in some
of thé cases, that "in contracts of sale a single governing law can
only be applied on thé basis of thé hypothetical intention of thé
parties if thé geographical connections of thé relationship in question
are of such unequal weight that one of thèse connections clearly
takes precedence over ail thé others."172 The extrême artificiality to
which reliance on thé lex loci solutionis can lead is shown by thé
following décision of thé Eighth Civil Senate of February 14, I958.173
The question was whether thé limitations law of Germany or Italy
applied to thé claim by Italian purchasers of steel cable against thé
German manufacturer-seller for return of thé purchase priée and
transportation costs. The claim was based on thé ground that thé
steel cable had not been rust-resistant as thé contract required and
therefore had rusted and become useless for thé purpose for which it
had been bought, narnely, use on fishing vessels. The limitation
period for a claim is regarded by German law as a matter of sub-
stance rather than of procédure.
170
2 E. Rabel, supra note i, at 469-72; von Caemmerer, Note, [1959] Juris-
tenzeitung 362, 363; Raape, op. cit. supra note 111, at 482-86.
171
The exception is BGH, 4th civ. sen., March 23, 1955, [1954-55] IPRspr 55,
involving thé obligation of thé German buyer's German bank to compensate
a confirming Italian bank for payment on a letter of crédit to thé Turkish
seller of eggs.
172
BGH, 8th civ. sen., September 22, 1971, 57 EBGHZ 72, 76 (emphasis in
thé original) ; see also BGH, 8th civ. sen., June 9, 1960, [1960] NJW 1720,
1721; BGH, 8th civ. sen., January 10, 1958, [1958-59] IPRspr 143, 145;
BGH, 4th civ. sen., March 23, 1955, supra, note 171 at 56. See further
Raape, op. cit. supra note 111, at 488.
173
BGH, 8th civ. sen., February 14, 1958, [1958-59] IPRspr 155. This report
is fuller than thé one in [1958] NJW 750.
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The Eighth Civil Senate, affirming in this respect thé appeal

court, held that thé correct analysis of thé choice of law problem
was as follows: (a) There was no express or implied intention of
thé parties as to thé law governing thé contract. (b) No hypothetical
intention could be established in favour of either law, because thé
interests of thé parties in thé application of their respective laws were
equal. (c) The law of thé place of performance therefore had to be
applied. (d) The issue related to thé buyer's obligations, because thé
claim related in essence to thé obligation to pay thé purchase price,
or, what amounted to thé same thing, a claim to hâve thé price
refunded. (e) The relevant place of performance was therefore
Italy, because thé place of performance is, according to BGB Article
269, presumed to be thé domicile of thé obligor, in thé absence of a
contrary agreement. (f ) This référence to Italian law, however, was
not a référence to thé rules of Italian domestic law (Sachnormver-
weisung] but a référence to thé whole of Italian law (Gesamtver-
weisung), including its private international law rules. (g) Article
25 of thé Italian Civil Code therefore applied, which provides that
if thé parties are of différent nationalities thé governing law shall
be thé law of thé place where thé contract was made. ( h ) The con-
tract hère was formed when thé German manufacturer accepted
thé offers contained in two letters sent by thé Italian buyer, which
acceptance took place at thé manufacturées plant in Germany.174
(i) German law therefore applied.175
The relentless unreality of thé method applied in this case is
striking. The resuit seems to be arrived at by piling one arbitrary
principle on top of another until thé outcome is practically a matter
of chance. In récent years this method has fortunately been applied
so seldom176 that it is not worth while discussing thé court's use of
thé rules concerning whether it was thé buyer's or thé seller's obliga-
tion that was in question, and what was thé place of performance
174
Apparently thé orders were acted upon there by shipping thé goods.
175
The court was fortunately not required to apply "full renvoi" by following
thé German conflicts rule a second time to Italian law, and determining
whether Italian law would "accept" that référence back to itself, because
EGBGB Art. 27, as interpreted by thé German courts, forbids thé use of full
renvoi. See Soergel-Kegel 703.
176
Aside from thé five cases cited in notes 171 and 172 supra, and thé steel
cable case, thé only other post-war cases in thé BGH that I hâve found,
which hâve applied thé lex loci solutionis rule are BGH, ist civ. sen., May
20, 1952, 6 EBGHZ 127, and BGH, 8th civ. sen., June 26, 1963, [1962-63]
IPRspr 81.
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of thé buyer's obligation to pay thé purchase price. The use of renvoi
is noteworthy, because it is clear law that renvoi is not relevant if
thé parties hâve chosen thé applicable law,177 and thé prevailing
view seems to be that it is also irrelevant if thé governing law is
found by determining thé parties' hypothetical intention.178 The
possibility of renvoi is therefore an additional mark of thé dichotomy
between thé place of performance rule and thé rest of thé German
choice of law scheme.
Rules Derogating from General Choice of Law Principles for

thé Validity of Contracts
German writers seem to hâve been less inclined than their French
counterparts to theorize about général catégories of laws that may
displace thé lex contractus in appropriate circumstances, like "laws
of immédiate application" or lois de police. The focus of their atten-
tion has been thé général provision in thé law on thé introduction
of thé BGB (EGBGB) that relates to ordre public, Article 30:
The application of a foreign law is excluded, whenever such application
would be contrary to good morals (guten Sitten) or would work con-
trary to thé policy (Zweck) of a German law.
This article has traditionally been given a restrictive interprétation.
The meaning of "good morals" has been taken to be essentially co-
extensive with its meaning in domestic law, although where thé cir-
cumstances involve other countries their differing moral standards
are also to be considered.179 The broader, second limb of Article 30,
dealing with contraventions of thé policy of a German law, was given
its définitive interprétation by thé Reichsgericht : thé case must be
such that "thé disparity between thé respective political or social
views that hâve given rise to thé relevant foreign law and thé con-
flicting German law must be so gréât that to apply thé foreign law
would undermine thé foundations of German political or économie
life."180
177
Soergel-Kegel 131; Raape, op. cit. supra note n i , at 473.
178
BAG, April 10, 1975, [1975] NJW 2160; Graue, "Riick- oder Weiterver-
weisung im internationalen Vertragsrecht," [1968] Aussenwirtschaftsdienst
des Betriebsberaters 121, 125. Kegel dissents, but notes that there is a
différence of opinion: Kegel, op. cit. supra note 112, at 173; Soergel-Kegel
131, n. 16.
179
Soergel-Kegel 766; Kekel, op. cit. supra note 112, at 233-34. F°r other
provisions using thé same expression, see BGB Arts. 138, 817, 826.
180
RG, 2d civ. sen., June 28, 1918, 93 ERGZ 182.
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274 The Canadian Yearbook of International Law igj8
This concept of ordre public seems to hâve found little application

in thé field of contracte, leaving aside thé gold clause case of 1936,
where its use was open to question. One case, mentioned earlier,181
présents a neat contrast with thé French position that thé VRP law
for thé compensation of sales agents applies as a loi de police where-
ever thé agent performs his services in France. The German sales
agent for a Dutch company argued, inter alia, that his right to com-
pensation after termination under Article 8gb of thé Commercial
Code (HGB) was protected as a "policy of a German law" from
being defeated by thé choice of Dutch law and a Dutch forum in
his contract with thé principal. The Bundesgerichtshof held that this
right was not protected under Article 30 of thé BGB. It said that thé
lack of an analogous remedy in Dutch law could hardly be said to
be contrary to good morals, since thé remedy was also unknown to
German law until 1953; and, as for thé "policy of a German law":
This provision is to be narrowly construed. It is not simply to be applied
wherever thé foreign law difîers from mandatory rules of German law.
The mandatory German rule must, rather, be of such a fundamental
and far-reaching character that it must be taken as being irreconcilable
with any contrary foreign rules.182
Dr. Mann has argued that as a général rule, even mandatory pro-
visions of German law that include an express provision with respect
to their territorial scope of application should be interpreted as dis-
placing thé rules of private international law only if they fall within
thé ambit of Article 3O.183
The 1976 statute on standardized contractual terms, discussed
above,184 includes thé following provision as section 12 :
Application in an international case. If a contract is governed by foreign
law or thé law of thé DDR, thé provisions of this statute shall never-
theless be taken into account (berûcksichtigen), if
(a) thé contract was entered into as a resuit of an ofTer to thé public,
a public solicitation or similar activity of thé party responsible for
thé standardized term, within thé area to which this statute ap-
plies, and
181
i«2 [, 9 6i] NJW at 1062.
isa Mann, "Kollisionsnorm und Sachnorm mit abgrenzendem Tatbestandsmerk-
mal," in F. Baur, J. Esser, F. Kûbler, and E. Steindorff, eds., Funktionswan-
del der Privatrechtsinstitutionen: Festschrift fur Ludwig Raiser zum 70.
Geburtstag 499, at 506-7 (1974).
184
https://doi.org/10.1017/S0069005800013072
(b) thé other party to thé contract, at thé time he made thé déclara-
tion that was intended to lead to thé contract's conclusion, had his
domicile (Wohnsitz) or his ordinary résidence (Aufenthalt) within
thé area to which this statute applies and his déclaration was made
within that area.
"Taking into account," as Kegel remarks,185 is not thé same thing
as "applying." It is left to thé court to décide whether, even given
thé (quite considérable) contacts with Germany provided by para-
graphs (a) and (b), thé law of thé contract should still be allowed
to prevail over thé standards of thé German statute. The principal
area in which section 12 will be important appears to be public
solicitations, like mail order campaigns, conducted in Germany and
responded to by German résidents. German courts may well be in-
clined in such cases to base their décision in part on thé extent to
which thé seller's campaign was aimed at thé German market. Mail-
order advertisements by an English firm in English magazines sold
in Germany would fall within thé statute, but would not seem to
provide as compelling a case for its application as, say, mail-order
advertisements by thé same firm in German magazines. The ap-
proach demonstrated by section 12 of thé AGB-Gesetz has no real
counterpart in thé jurisprudence relating to choice of law; contracts
involving parties of substantially différent negotiating strength — thé
case of thé Dutch company and thé German sales représentative is
one in point — hâve not been treated as presenting problems différ-
ent from those in commercial contracts.186
185
Kegel, op. cit. supra note 112, at 297.
186
Cf. Lando, "Consumera Contracts and Party Autonomy in thé Conflict of
Laws," in Mélanges de droit comparé en l'honneur du Doyen Ake Malm-
strôm 141, at 153-54 (1972).
(To be continued)
https://doi.org/10.1017/S0069005800013072

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Choice of Law Methods in the Private

International Law of Contract

F OR ANYONE who is interested in the methodology of choice of law,

* Associate Professor, Faculty of Law, University of British Columbia. This

This article attempts to trace the main features of the choice of

The Theory of the Autonomy of the Parties and Responses to It

tion asserted the primacy of French law as a matter of ordre public,

acter in international law, so as not to lose, at least where it is un-

peated his theoretical objections to thé principle but accepted as law

one aspect of this localization — just a single factor whose présence,

Batiffors reasoning reveals his concern to find a single, generative

The theoretical neatness of this solution, however, belles its under-

Although, as we shall see, some décisions of thé courts lend sup-

Décisions of thé French Courts on thé Law Governing thé

to govern différent issues in their contract,34 thé leading décision is

sterdam, usually referred to as thé Messageries Maritimes case.38 It

changes in thé law governing their agreement. Whichever interpré-

Where There is No Express Choice of Law

provided that thé parties hereby elected domicile in Hanoi.45 Other

The action was brought by a French company that distributed

of thé defendant's domicile. There was no considération of thé policy

plaintiff. To this question thé First Chambre Civile applied French

One is at a loss to know what test is being employed hère. Some

for a contract is found, because "subjective" factors, such as thé

Rules Derogating from General Choice of Law Principles

consent, capacity, or method of performance. The rules to be dis-

her shareholding by a certain deadline,was upheld.67 In thé Mes-

most productive of litigation bas involved commercial agents or sales

police as a "bilatéral" concept, one that can resuit in thé displace-

bringing some theoretical order to thé muddled areas of ordre public

Whereas French case law is réticent about thé précise method-

established, thé law of thé place of performance détermines thé rule

This strikingly heterogeneous group of rules is very différent from

Express Choice of Law

Although thé basic rule of thé primacy of thé parties' intention

The more récent writers hâve tended to accept without reserve

favour of Berlin in an effort to make it enforceable. The Reichsgericht

German judge to deny that their choice of a place of performance

had had an interest in thé guaranty's being subject to German law.

The bonds were made subject to thé terms of a trust indenture by

however, thé Reichsgericht held thé gold clause operative in a way

Inferred (Stillschweigend) Intention of thé Parties

lex fori because of thé légal presumption that if no foreign law is

In 1908, for example, a charterparty between German charterers

debts in Reichsmarks created in German colonies before they were

The Bundesgerichtshof's "weighing of interests" formula has since

In thé greater part of thé cases decided by thé Bundesgerichtshof

invalidate thé agreement.166 The freedom with which thé Bundes-

perform is governed by thé law of A but thé obligation to pay by

The Eighth Civil Senate, affirming in this respect thé appeal

Rules Derogating from General Choice of Law Principles for

This concept of ordre public seems to hâve found little application

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