What is the meaning of ” proper law of the contract”

The observation of Lord Wright (on this subject) while delivering the judgment of the Privy Council in Mount Albert Borough Council v. Aus. T. and G Mutual Life Assurance Society Ltd. (1937) 4 All ER 206 at p. 214 (C).

“The proper law of the contract means that law which the English or other court is to apply in determining the obligations under the contract. English Law, in deciding these matters, has refused to treat as conclusive, rigid or arbitrary criteria such as lex loci contractus or lex loci solutionis and has treated the matter as depending on the intention of the parties, to be ascertained in each case on a consideration of the terms of the contract, the situation of the parties & generally on all the surrounding facts. It may be that the parties have in terms in their agreement expressed what law they intend to govern, and in that case prima facie their intention will be effectuated by the court. But in most cases they do not do so. The parties may not have thought of the matter at all. Then the Court has to impute an intention, or to determine for the parties what is the proper law which, as just and reasonable persons, they ought to or would have intended if they had thought about the question when they made the contract. No doubt there are certain prima facie rules to which a Court, in deciding on any particular contract, may turn for assistance, but they are not conclusive. In this branch of law, the particular rules can only be stated as prima facie presumptions.

Applying the above principles to the facts here, it appears perfectly clear that the a proper law governing the promissory note transaction between the parties was the law of Cey-lon, and not certainly the Madras Agriculturists’ Relief Act. And this must have accounted for the failure of the defendant to raise a plea based on Section 13 of that Act, before either the District Court of Colombo or in appeal before the Supreme Court. In the Travancorc case in Lekshmanan Chettiar v. Chinnachami Pillai, 1943 Trav LR 943 (D) a decree passed by the Periyakulam Munsiff’s Court (in British India) was transferred for execution to the Munsiff’s Court in Devi-colam. The debtor and the creditor were of British Indian domicile and permanent residents of British Indian territory, and the contract was entered into and intended to be performed only in British India. Before the Devicolam Munsiff’s Court the debtor claimed the benefit of the Tra-vancore Debt Relief Act and it was granted. In appeal by the creditor, held (reversing the order) that the Act will not apply to the foreign decree sought to be executed. And Krishnaswamy Iyer C. J. observed :

“The debt evidenced by the decree in question is one which is the result of a contract entered into a foreign place. The substantive law relating to the contract between the parties is the British Indinn Law. The fact that a judgment has been obtained does not make any difference. A judgement debt is a chose in action and must be held situate in the country where the judgment was obtained. How the contract the debt resulting therefrom, and the decree evidencing it can be resolved is a matter of substantive law. The rules of Private International Law require that the Courts of the State should apply the substantive law of British India to the decree, just as the British Indian Courts may have to apply the Debt Relief Act of Travancore in, the matter of a decree of a Court of a State transferred for execution to a British Indian Court.”

The question in this case is practically the same. Only, the foreign judgment is here the subject of a separate suit while there, it was capable of execution by transfer to the local Court and was so transferred. “We have no hesitation therefore to follow the above decision. Reference may also be made to Ganga Prasad v. Ganeshi Lal AIR 1924 All 161 (E). The suit there, was brought in British India and was founded on a judgment passed by a Dholpur Court (foreign Court) & it was pleaded that if the suit upon which the foreign judgment was passed had been brought in British India it would have been held to be time barred under the law of limitation in operation in British India. It was held, however, repelling the plea, that there had been no refusal to recognise the law in British India where such law was applicable. And the general rule was also stated that: “A Court which entertain a suit on a foreign judgment cannot in-stitute an enquiry into the merits of the original action or the propriety of the decision.” [ (1958) AIR(Kerala) 126 : (1958) ILR(Kerala) 100 : (1957) KerLJ 994 : (1957) KLT 1035- KERALA HIGH COURT -C.V. KUNHIMAN Vs. P.M.K. IDROSEKUTTY ]

Categories: CIVIL

Tagged as: