Applicable law—common law (contract)

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Applicable law—common law (contract)
  • Why is the applicable law important?
  • When is the common law applied?
  • Common law rules—three stage enquiry
  • First stage—express choice of law
  • Contractual mechanism to determine the applicable law
  • Second stage—implied choice of law
  • Third stage—system of law with the closest and most real connection
  • Applicable law must be the law of a country

Applicable law—common law (contract)

This Practice Note sets out when the common law of England and Wales applies to determine the applicable law in respect of contract claims. It sets out the common law and how it is applied.

Why is the applicable law important?

When determining a contractual dispute it is important to know the law of the country that is to be applied by the courts to determine that dispute. This is known as the applicable law, governing law or proper law. The rationale for there to be a proper law of a contract was explained in the dictum of Lord Diplock in Amin Rasheed v Kuwait Insurance as follows:

‘My Lords, contracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect unless they were made by reference to some system of private law which defines the obligations assumed by the parties to the contract by their use of particular forms of words and prescribes the remedies enforceable in a court of justice for failure to perform any of those obligations …’

When is the common law applied?

It is rare that the courts will apply the common law to determine the applicable law.

When determining the applicable law for contract claims there are a number of potential applicable law regimes and the regime that is applied by the

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