This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In the discussion of contracts up to this point, it has been assumed that the question of the law which controls the contract is immaterial. This question may, however, become most em' inently material. It is perfectly possible, especially in a coum try like ours, whose business interests are not in the least bounded by the state lines that confine the jurisdictions of the courts, that parties domiciled in different states may make a contract in another, concerning property situated in a fourth, which contract is to be performed in a fifth and on which suit is brought in a sixth. While it is comparatively rare that so many systems of law compete for the honor of controlling a contract, we must observe that the systems of law which must be regarded as having at least a claim for consideration are (1) the law of the place where either of the parties is domiciled, or both; (2) the law of the place where the property contracted for is situated, either real or personal; (3) the law of the place where the contract takes effect; (4) the law of the place where the contract is to be performed; and (5) the law of the place where the suit is brought. With business transactions running over as wide a territorial range as is common to-day, and with as great diversity in Common Law and above all in statute law, as is often met with, one of two things must happen. Either the court before which the action is brought must ignore all other systems and apply its own; or rules must be worked out for determining under what circumstances each competing system must apply. The former alternative would result in utter confusion. The rights of parties would in many cases depend on the hazard of chance in determining in what state an action on the contract would be brought. The latter alternative has therefore been adopted by the courts of all nations. For the body of rules by which it is determined what system of law will apply, there are two names in general use, neither appropriate. One is Private International Law - a name given to a subject which is not International Law, and which is no more private than any system of law. The other is Conflict of Laws - a name given to a body of rules which has for its object the avoidance of a conflict of laws. The latter name is probably the more suitable, unless the more accurate, though less concise term, - the Law Controlling a Contract, - is employed. The effect of an adjudication of a foreign court which has jurisdiction to render such adjudication is to be distinguished from the doctrine of the law controlling a contract. Since an adjudication of a court of competent jurisdiction is binding until reversed, even if erroneous, it follows that even if the foreign court applied the wrong system of law its judgment is conclusive.1 Thus a bill of lading contained a provision exempting the carrier from liability for loss by fire, even if due to its own negligence. The cause of action arose in New Hampshire: New Hampshire law controlled, and by that law such provision was contrary to public policy. Loss by fire occurred through the carrier's negligence. The injured party voluntarily submitted the case to a Canadian court, which decided in favor of the carrier, failing to apply New Hampshire law. It was held in a subsequent suit in New Hampshire that the judgment of the Canadian court was a bar to a subsequent action.2