First Restatement of Conflicts
§§ 7, 311-12, 314-15, 323, 325-26, 332-36, 340, 355, 358, 360-61, 372.
Essentially, the choice of law state will be based on where the contract was formed and becomes effective. Additionally, performance will be measured by the state where the performance is to be completed.
Poole v. Perkins
126 Va. 331 (1919).
Poole lost at trail and appealed.
Question
Whose laws apply, Virginia’s or Tennessee’s? Answer to this question will determine whether the contract was voidable.
Rule
A contract is formed and governed in the state where the performance is to be completed.
Holding
Payment of the note (performance) was to be done in Virginia. As such, the contract is valid, binding, and not voidable in accordance with Virginia law. Affirmed.
Facts
Mrs. Poole entered into a promissory note with Perkins. Poole then defaulted on the note and Perkins sought recovery. The states in question is Tennessee and Virginia. All the parties are residents and domiciled were originally domiciled in Tennessee, but then all parties moved to Virginia and payment of the note was to be sought and obtained in Virginia. However, the execution (negotiation, signing, and delivery) of the note was actually completed in Tennessee.
The conflict of laws between these states is whether a married woman had the capacity to enter into a contract. Tennessee says no and therefore a contract may be voidable by the woman, while Virginia says yes and therefore a contract may be upheld.
Analysis
Although the signing occurred in Tennessee, the performance of the contract is what matters. The note was delivered to Virginia and payment was expected in Virginia. As such, Virginia law is the law that will govern this contract. Because Virginia law would uphold a contract made by a married woman, the plaintiff is entitled to the payment they demanded in accordance with the promises made in the note.
Additional Notes
To determine whose laws will apply, the court will consider where the contract was formed. To determine where the contract was formed, the court will see what was the place of performance and where the parties intended to form the contract.
This case is at seeming odds with the First Restatement approach, because it focused so much on the intent of the parties. There are many debates about how much a court should rely on intent, because of how difficult the intent can be to discern.
The court also says that the contract formation is the place of performance, then goes on to say that performance occurred in Virginia. However, as a promissory note, wouldn’t performance occur when the loan was provided? Or was performance the repayment of the loan? Virginia appears to treat repayment as the act of performance.
Note that our analysis follows first to whether a contract is valid (whether a person has the capacity to contract). Once we determine that there is a valid contract, we can look to see whether performance applies.
Linn v. Employers Reinsurance Corp.
392 Pa. 58 (1958).
Linn was the plaintiff who lost at trial and appealed.
Question
Whose laws apply, New York or Pennsylvania? If New York, the defendant win, otherwise the plaintiff will win.
Rule
The contract is formed in the place where acceptance is spoken from (in the case of acceptance being communicated via telephone).
Holding
There is no evidence to show that the defendant made a call and accepted the contract from New York. As such, the laws of Pennsylvania (as the forum state) will apply. The plaintiff wins.
Facts
The plaintiff was an insurance broker who helped the defendant receive an insurance client. As such, the insurance broker was to receive a commission on the premiums paid to the defendant.
- The plaintiff insurance broker is from Pennsylvania
- To form the contract, the plaintiff traveled to New York to meet with the defendant.
- However, the defendant was not authorized to accept the offer at the time, requiring authorization from the headquarters in Kansas.
- Later obtaining authorization, the defendant called the plaintiff to accept the offer.
The conflict of laws arose because New York had a statute of frauds requirement that was not satisfied by the contract.
Analysis
It would make sense that the law to be applied is where the call is received and heard. However, that is not how precedent has worked. Instead, many states say that the state where the acceptance was spoken will govern. Here, there is simply no evidence of which state the call was spoken from. Upon remand, the defendant was unable to prove that the call came from New York and therefore the forum state (Pennsylvania) governed.
Additional Notes
Acceptance by telephone, email, etc. is called the Dispatch Rule. This rule can have some issues though. For example, what if the person accepting is in a state completely disconnected from the contract or from the parties (the acceptor was on vacation or a business trip).
Sometimes there are situations where the case can be characterized by tort or contract, and may have several issues associated with those issues. So, you need to take the problem issue by issue, also known as “Depecage.”
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
