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.
If the parties to a contract have expressly agreed upon the system of law whereby their contract is to be controlled, such provision is ordinarily obligatory, and no room remains for the application of those rules by which this problem is solved in the absence of such express stipulation.1 Thus such a provision may prevent a contract from being subject to the usury laws which would otherwise apply.2 Thus an express reference to the law of the state where a contract is made,3 or where it is made and to be performed in part,4 makes the law of such state control as to construction. It is conclusively presumed that the parties know the law of the jurisdiction which they thus adopt.5 To this rule there is, however, at least one well recognized exception. If the parties fix the system of law that is to control in order to evade a restriction or prohibition of that system of law which would otherwise control, and this prohibition or restriction has been established for reasons of public policy, the agreement of the parties will be ignored, and that system of law applied which would otherwise control. This rule is generally insisted on when suit is brought in the same jurisdiction as that whose law it is thus sought to evade.6
20 Bacon v. Hunt. 72 Vt. 98; 47 Atl. 394.
21 Even if the land mortgaged to secure such debt is in the state of the borrower's domicile and suit is there brought. United States, etc., Co. v. Beekley, 137 Ala. 119; 97 Am. St. Rep. 19; 33 So. 934.
1 Spurrier v. La Cloche (1902), App. Cas. 446; Royal Exchange Assurance Corporation v. Sjoforsakings Atkiebolaget Vega (1902), 2 K. B. 384; Hamlyn v. Talisker Distillery (1894), A. C. 208; London Assurance v. Companhia de Moagens, 167 U. S. 149; Liverpool, etc., Co. v. Ina. Co., 129 U. S. 397; Mutual Life Ins. Co. v. Hill, 118 Fed. 708; 55 C. C. A. 536; affirming, 113 Fed. 44; Mit-tenthal v. Mascagni, 183 Mass. 19; 97 Am. St. Rep. 404; 60 L. R. A. 812; 66 N. E. 425; .Russell v. Pierce, 121 Mich. 208; 80 N. W. 118; Smith v. Parsons, 55 Minn. 520; 57 N. W. 311; Hale v. Cairns, 8 N. D. 145; 73 Am. St. Rep. 746;
44 L. R. A. 261; 77 N. W. 1010; Jones v. Trust Co., 7 S. D. 122; 63 N. W. 553; Dugan v. Lewis, 79 Tex. 246; 23 Am. St. Rep. 332; 14 S. W. 1024; Griesemer v. Trust Co., 10 Wash. 202; 38 Pac. 1031. " It is no injustice to the company to decide its rights according to the principles of the law of the country which it has agreed to be bound by so long as, in a case like this, the foreign law is not in any way contrary to the policy of our own." London Assurance v. Companhia de Moagens. 167 U. S. 149, 161.
2 Hale v. Cairns, 8 N. D. 145; 73 Am. St. Rep. 746; 44 L. R. A. 261; 77 N. W. 1010.
3 Dugan v. Lewis, 79 Tex. 246; 23 Am. St. Rep. 332; 14 S. W. 1024.
4 Mittenthal v. Mascagni, 183 Mass. 19; 97 Am. St. Rep. 404; 60 L. R. A. 812; 66 N. E. 425.
5 Mutual Life Ins. Co. v. Phinney, 178 U. S. 327; reversing, 76 Fed. 617; 22 C. C. A. 425.