Chapter XIV: Miscellaneous (2)

CONFLICT OF LAW.--Although we have referred to the uniform legislation in the various topics of commercial law which we have been considering, there is still much in the subject of conflict of law which concerns the student of commercial law. International law is commonly divided into two branches, public and private. Public is that which regulates the political intercourse of nations with each other; private, that which regulates the comity of States in giving effect in one to the municipal laws of another relating to private persons. Conflict of law is one division of the broader subject of international law and is frequently called private international law. In the sense in which we are now using the term, the various States of the Union are considered as foreign to each other. The problems embraced in this topic and their bearing on commercial law may be more fully appreciated if we take a simple illustration. A stock broker with offices in New York City seeks to sell the stock of a new oil mining company to a purchaser in Indiana. The sale is one which is not allowed by the Indiana "blue sky" law. New York has no such law. The sale is effected by means of circulars and correspondence between the New York broker and the Indiana purchaser. Is this transaction to be governed by the law of Indiana or of New York? Its validity will depend upon our answer to that question and this is the type of question one has to answer on the subject of conflict of law. With approximately forty different "blue sky" laws in the country at present, and the great number of stock transactions carried on between the States, the importance of this topic may be appreciated. Again, even where we have a uniform act as, for example, the Uniform Negotiable Instruments Act, there are still differences in the law in some States. Each statute must be interpreted by the courts, and although the judges are sincere in their efforts, it can not be expected that we will always have a uniform interpretation of the same act by the courts in each and every jurisdiction of the United States.

FUNDAMENTAL PRINCIPLES.--There are several fundamental principles we should keep in mind before we turn to the specific branches of commercial law as affected by our topic. The term comity is one of common use in conflict of law and is defined as the recognition which one nation or State allows within its territory to the legislative, executive, or judicial acts of another nation or state. Comity is not a matter of right, but a courtesy, and one country may exercise its right and prohibit citizens of other countries from suing in its courts. Of course the various States of the United States are not as completely free in this matter as separate countries, because of the provision in the Federal Constitution guaranteeing to the citizens of each State all the privileges and immunities of citizens in the several States. There are still many questions which are not affected by the Federal Constitution. For example, a suit is brought in New Jersey upon a contract of suretyship made in New York by a wife for her husband. There is a statute in New Jersey prohibiting a married woman from doing this. New York has no such statute. Shall the New Jersey court enforce the contract which the parties made in New York but which they could not have made in New Jersey? Under the principle of comity a New Jersey court has held valid such a contract. Again, it is entirely conceivable that a person living in Turkey might make a binding contract to marry three women at the same time. Suppose the Turk before the time for performing the contract arrives, comes to New York and then refuses to marry the three women. Could they sue him for a breach of contract in the New York court? Clearly not. Here they would be asking the New York court to enforce a contract which while admittedly valid, when made in Turkey, is decidedly against the public policy of any monogamous country. Comity being a courtesy, not a right, would not require a New York court to recognize the Turkish contract. In our illustration of the wife acting as surety, no question of public policy was involved and hence there was no impropriety in New Jersey recognizing as valid her contract, although such a contract could not have been made within the State of New Jersey.

CONFLICT OF LAW AS RELATING TO THE STATUS OF PROPERTY.--As we have pointed out heretofore, property is divided into real property and personal property. Reference should be made to the distinctions between these two kinds of property as described in a preceding chapter. Suppose A dies intestate in Texas owning real property in New York. The law relating to the descent of real property is different in Texas from that in New York. A's heirs wish to know by which law this New York real estate will be governed. It is almost universally recognized that all matters concerning the title and disposition of real property are determined by what is known as the lex loci rei sitae, that is, the law of the place where the property is situated. Accordingly the heirs in Texas would be governed by the law of the State of New York and, similarly, if A had also owned property in Illinois, that property would be governed by the Illinois law. Suppose, also, A had owned $50,000 worth of stock in various corporations and he kept one-half of this stock in his safe deposit box in Galveston and the other half in New York City. While the dominion of a State over personal property within its borders is complete, nevertheless by virtue of the principles of comity, the rule has been recognized almost from time immemorial that personal property is governed by the law of the domicile of the decedent at the time of his death. Hence A's stocks (and bonds for that matter) would be divided according to the law of Texas whether they were in his safe deposit box in Galveston, New York City, or Chicago. It follows, when no rights of creditors intervene, that the law of the domicile of the testator will control in regard to his will of personal property, and the law of the place where the real property is situate will control in regard to it.

CONFLICT OF LAW AS RELATING TO CONTRACTS.--It is a general principle of contract law that the construction and validity of a contract is governed by the lex loci contractus, the law of the place where the contract is made. When the contract is made in one jurisdiction and is to be performed in another, the question becomes more difficult. The Supreme Court of the United States, in Scudder v. Union Nat. Bank, 91 U. S. 406, has laid down the following rules in reference to the law governing contracts in cases in which the place of making and the place of performance are not the same. "1. Matters bearing upon the execution, interpretation and validity are determined by the law of the place where the contract is made; 2. Matters connected with the performance are regulated by the law of the place where the contract by its terms is to be performed; 3. Matters relating to procedure depend upon the law of the forum (i. e., the court where the case is heard)." These three general rules have been adopted and applied by many jurisdictions in a long line of cases involving every conceivable kind of contract. But perhaps it is even more generally stated, when the contract is to be performed in a place other than the place where it is made, that the law of the place where the contract is to be performed will determine the validity, nature, obligation and effect of the contract, or, in other words, in case of conflict the lex loci solutionis (the law of the place of performance) will prevail over the lex loci contractus. Although these statements at first seem somewhat contradictory, we may always apply another rule which is a sound test for the determination of the proper law to be applied. We may properly say that the intention of the parties should control and it is generally agreed that the law of the place where the contract is made is, prima facie, that which the parties intended to govern the contract, and in the absence of a contrary intention ought to control. It frequently happens that a contract made in one State is sued upon in the courts of another State. The law governing the procedure in the trial of this case will be the law of the forum, that is of the State where the case is tried, regardless of what the law may be on the same matter in the State where the contract was made. There may be, for example, a peculiar rule as to a wife's being able to testify on the contract in question. This rule will be enforced by the court although no such rule existed in the State where the contract was made. There is no great hardship in the application of such principles because the courts of the State where the contract was made are open to the parties, and if they wish to avail themselves of the services of a court in a different jurisdiction they must take it as they find it with its rules of procedure.

ILLUSTRATION.--There is another type of contract which involves the question of conflict of law to which attention should be called. The facts in the case of Fonesca v. Cunard Steamship Company 153 Mass. 553, illustrate this point. A passenger on one of the steamships of the Cunard Steamship Company bought a ticket in Liverpool for Boston and on the ticket was a clause providing that the steamship company should not be liable for any damage to a passenger's baggage during transit, regardless of whether the steamship company was negligent in handling the baggage. When the passenger arrived in Boston, and her trunk was delivered, it was found that the contents had been damaged by sea water due to the steamboat company negligently leaving a porthole open. The passenger sued, and the Massachusetts court held there could be no recovery for the damage, for, although such a clause exempting a carrier for his negligence was not valid under the Massachusetts law (and in fact the law of practically all American jurisdictions), nevertheless, since the law of England permits such a clause, and this was an English contract, the ticket having been bought in Liverpool, the passenger was bound by the terms of her contract. There are many kinds of contracts of transportation of baggage, of passengers and of telegraph messages, involving the carrying out of such contracts in many different States. Not all of the decisions in the various States of this country are harmonious. We must expect to find many such problems in business and the answer is often one that requires most careful study on the part of a lawyer.

CONFLICT OF LAW AS RELATING TO NEGOTIABLE PAPER.--There is not so large a field for questions of conflict of law to come up in negotiable paper as in some of the other topics we have been considering. Forty-seven States have now passed the Uniform Negotiable Instrument Law. But, as we have pointed out, the interpretation of this law in the various States is not invariably uniform. Suppose a promissory note has six indorsers. Every indorsement is governed by the law of the State where it was made, and should there be a different law in this matter, we would at once have a question in conflict of law. Again, in determining the negotiability of a document made in one place and payable in another, we have a further question in conflict of law. The authorities do not agree here although perhaps we may say the majority hold that the law of place or payment controls. These problems will be considered in the text-book on Negotiable Instruments.

CONFLICT OF LAW AS RELATING TO INTEREST AND USURY.--We find a variety of usury laws throughout the United States. Some few States allow the lender to charge any rate of interest. Others allow a fixed rate, usually 6%, and provide that the lender forfeits both principal and interest if he charges more. Still others allow a fixed rate and provide that interest only is forfeited if a higher rate is charged. It is easy to see that a contract made in one State may be sued upon in another State and the usury laws of the two States may be entirely different. We may say as a general rule that usury laws do not offend any principles of public policy. There is nothing wrong in asking a New York court, where the legal rate of interest is 6%, to enforce a contract made in a State where a higher rate is allowed. On the other hand, no New York court would allow citizens of New York simply to date a contract Boston, Massachusetts, and provide for a 10% interest rate, thereby hoping to evade the New York Usury law, when, except for the date on the contract, it was in reality wholly a New York contract.

INDEX

Page

Acceptance 32
Accommodation Bills 357
Accounting 133
Adequacy of Consideration 57
Administrators 68, 340
Advertisements 36
Agency 122, 141
Agency, Irrevocable 148
Airplanes 12
Alteration 72
Alteration of Written Contracts 113
Aliens 77, 84
Analysis of Indenture 219
Anti-Trust Act 206
Architect's Certificate 87
Articles of Partnership 175
Assault and Battery 408
Assets, Division of 186
Assets of Partnership 186
Assignment of Duties 107
Assignment of Future Claims 110
Assignment of Rights 106
Assignments 105
Assignments, Forged 242
Assignments, General 425, 430
Assignments, Meaning of 105
Assignments, Partial 109
Assignments by Unauthorized Agent 243
Assumption of Mortgage 314
Attachment 369, 374
Attachment of Stock 248
Attorney, Powers of 105, 125
Auction Sales 39
Authority of Agent 132
Avoidance 81

Bailment 262
Bank Accounting 228
Bank Officers, Liability of 226
Bank President 227
Bankruptcy 66, 95, 247, 428
Bankruptcy, Composition in 437
Barred Debts 64, 65
Beneficiary 75
Bids 40
Bilateral Contracts 26, 108
Bills and Notes 378
Bills of Exchange 392
Bills of Lading 270, 347
Blue Sky Laws 229
Bonds 216, 217
Breach of Contract 92
Breach of Warranty 281
Building Contracts 87
Burglary 422

Capacity, Lack of 244
Capacity of Parties 74, 77, 264
Carriers 267, 344
Certificate of Architect 88
Certificates, Forged 241
Certificates, Unindorsed 256
Certificates, Lost 255
Chattels 291
Chattels, Leases of 291
Chattel Mortgage 291
Checks 112, 382
Claim, Liquidated 59, 112
Claim, Proof of 434
Claim, Unliquidated 112
C. O. D. 270
Commercial Law 7
Common Carriers 344
Common Law 9
Competition, Unfair 457
Composition in Bankruptcy 437
Composition with Creditors 425
Conditional Contracts 86
Conditional Promise 35
Conditional Sales 289
Conflict of Laws 336, 458
Consideration 57, 390
Consignments 290
Construction of Wills 334
Contract, Agency by 125
Contract to Sell 261
Contracts 24, 299, 462
Contracts:
Bilateral 26, 108
Breach of 92
Building 87
By Correspondence 48
By Mail 48
Definition of 24
Discharge of 110
Drafting 114
Enforceability 57
Formal 25
Gambling 102
Illegal 101
Implied 41
Informal 25
In Restraint of Trade 101
Installment 91
Liquidated 58, 59
Of Employment 88
Performance 86
Quasi 115
Sealed 27
Simple 29
To Sell 261
Termination 86
Unenforceable 26
Unilateral 26
Unliquidated 59
Void 26, 81
Voidable 26, 66, 78, 81
Written 38, 72, 113
Contractors 161
Contribution 446
Contributory Negligence 416
Conveyances, Fraudulent 429
Copyright 450
Corporations 85, 86, 192
By-Laws 207
Citizenship of 196
Creation of 194
De Facto 201
De Jure 201
Directors 212
Foreign 209
Indenture 217
Joint Stock 168
Kinds of 194
Liability of 205
Liability of Directors 224
Liability of Officers 224
Management of 210
Powers of 197, 221
Stockholders 208
Correspondence, Contracts by 48
Counter Offer 43
Courts 20, 21
Creation of Corporations 194
Creditors' Rights 186
Criminal Law 205, 405, 419
Cumulative Dividends 223
Cumulative Voting 213
Curtesy 300, 336

Death 44, 375
Debts 64, 65
Deceit 412
Deeds of Trust 317
De Facto Corporation 201
Default 301
Defective Goods 282
Definition of Agency 122
Definition of Contracts 24
Definition of Law 7
Definition of Partnership 164
De Jure Corporation 201
Delectus Personarum 173
Delivery 272, 388
Delivery, Lack of 244
Destruction of Goods in Transit 362
Directors 212, 221
Directors, Election of 212
Directors, Liability of 224
Directors, Powers of 197, 221
Disability 124
Discharge of Contracts 110
Dividends 222
Divine Law 7
Division of Assets 186
Dower 300, 335
Drafting Contracts 114
Drafts 381
Drunkards 77, 79, 82
Due Course, Holders in 383, 396
Duress 99
Duties, Assignment of 107

Easements 14
Employment Contracts 88
Enforceability of Contracts 57
Equitable Title 284
Equity of Redemption 308
Entity Theory 193
Estates and Trusts 321
Escheat 319
Estoppel 128, 130
Executors 68, 254, 340

Fact, Mistakes of 100, 116
False Imprisonment 414
Fidelity 133
Fiduciary Duties 104
Firm Name 176
Firm Property 186
Forbearance 63
Foreclosure 316
Foreign Corporations 209
Forged Assignments 242
Forged Certificates 241
Forgery 367, 423
Formal Contracts 25
Forms:
Check 382
Draft 381
Promissory Note 379
Will 328
Fraud 96, 97, 98, 99, 412
Frauds, Statute of 67
Fraudulent Conveyances 429
Fraudulent Sales 285
Full Payment 112
Future Claims 110

Gambling Contracts 102
Garnishment 373
General Agents 141
General Assignments 425, 430
Gifts 261, 293, 324, 376
Goodwill 178
Guarantee 36, 68, 440
Guaranty (see Guarantee).

Holder in Due Course 383, 396
Homicide 421
Husband and Wife 249

Illegal Contracts 101
Illegal Object 172
Illegality 104
Implied Authority 137
Implied Contracts 41
Implied Warranty 277
Impossibility 100
Imprisonment, False 414
Inability 94
Incapacity 244
Indentures 219
Independent Contractors 161
Indorsement, Qualified 399
Indorser 398
Infancy 66
Infants 11, 20, 26, 66, 77, 78, 79
Informal Contracts 25
Inheritance Tax Laws 377
Insane 80
Insanity 44, 77, 79
Insolvency 95
Insolvent Debtors 425
Inspection 273, 278
Installment Contracts 91
Insurance 86, 438
Insurance Policy 36
Intent 30
Interest 466
Interpleader 256
Interpretation 155
Irrevocable Agencies 148
Issue of Stock 215

Joint Stock Corporations 168

Knowledge of Illegality 104

Lack of Capacity 244
Lack of Delivery 244
Lands 69
Larceny 423
Law, Common 9
Law, Definition of 7
Law of Partnership 163
Law, Source of 10
Law, Systems of 9
Law, Where to Look for 11
Lawrence v. Fox 75
Lawyers 17
Leases 435
Leases of Chattels 291
Legal Duty 62
Legal Title 284
Liability of Agent 144
Liability of Bank Officers 226
Liability of Directors 224
Liability of Officers 224
Liability of Partnership 165
Libel 409
Limitations, Statute of 63
Limited 190
Limited Partnership 188
Liquidated Claims 61, 112
Liquidated Contracts 58, 59
Liquidation of Partnership 188
Lost Certificates 255

Magazine Subscription 55
Mail Contracts 48
Manslaughter 422
Marriage 69
Married Women 82, 83
Master and Servant 121, 149
Meeting of Stockholders 208
Mistake 100, 116
Misstatements of Opinion 97
Moral Law 7
Mortgage, Assumption of 314
Mortgage Deed of Trust 218
Mortgages 291, 304
Mortgages, Chattel 291

Necessaries 80
Negligence 281, 416
Negligence, Contributory 416
Negligence of Agent 160
Negotiable Instruments Act 378
Negotiable Paper 378, 465
Negotiability 364, 380, 394, 403
Newspaper Subscriptions 55
Non-Assignable Rights 106
Novation 108

Offer and Acceptance 32, 51
Open Receipts 371
Operation of Law 147
Opinion 97, 275
Options 34, 35, 94
Oral Agreements 38
Ownership of Stock 240
Ownership, Rights of 259

Part Payment 65
Partial Assignments 109
Parties, Capacity of 74, 77, 264
Partner by Estoppel 171
Partner, Powers of 177
Partner, Secret 190
Partner, Silent 190
Partnership 163, 188
Past Consideration 61
Patents 448
Performance 87
Performance Excused 87
Performance of Contracts 86
Performance, Specific 303
Personal Property 258, 259
Photographs 15
Power of Attorney 105, 125
Powers of Corporations 197, 221
Powers of Partners 177
Preferences 430
Principal and Agent 121
Principal, Liability of 142
Principal, Rights of 142
Principal Undisclosed 141
Privilege 411
Probate of Wills 331
Promise, Conditional 35
Promise to Marry 69
Promissory Note 379
Promoters 202
Property, Personal 258, 259
Property, Real 259, 276, 298
Proof of Claims 434
Prospectus 230
Protest 401
Proxy 144, 214

Qualified Indorsements 399
Quasi Contracts 115

Railroad Commissions 345
Ratification 81, 128, 142
Real Estate 69, 298
Real Property 259, 276, 298
Receipt in Full 113
Receipt of Acceptance 53
Receipts 59
Receipts, Trust 355
Receipts, Warehouse 370
Receiverships 430
Reimbursement 136
Rejection 42, 43
Releases 59
Renunciation 113, 147
Repudiation 95
Restraint of Trade 101
Revival of Debts 66
Revocation 42, 146, 330
Rewards 46
Rights, Non-Assignable 106
Rights of Ownership 259
Robbery 424

Safe Deposit Companies 372
Sale of Goods 71
Sales Act 287
Sales, Fraudulent 285
Sales of Land 69
Sales of Personal Property 260
Sealed Contracts 27
Sealed Powers of Attorney 126
Seals 27
Searches, Title 319
Secret Partner 190
Securities 231
Self-Defense 409
Set-Off 436
Servant, Master and 121, 149
Service of Agent 132
Sherman Anti-Trust Act 206
Shipper's Load and Count 361
Side Compensation 134
Silence Gives Consent 53
Silent Partners 190
Simple Contracts 29
Slander 409
Source of Law 10
Special Agents 141
Spent Bills 363
Specific Performance 303
Statute of Frauds 67
Statute of Limitations 63
Stock, Attachment of 248
Stock Certificate, Theft of 244
Stock, Dividends on 222
Stock Held in Trust 250
Stock, Issue of 215
Stock, Ownership of 240
Stock, Power to Sell 251
Stock, Transfer of 238
Stockholders 208
Stoppage in Transit 284
Surety Companies 446
Suretyship 440
Systems of Law 9

Tenders 40
Termination of Agency 145, 147
Termination of Contract 86
Termination of Partnership 185
Termination of Offer 44, 45
Testamentary Capacity 325
Theft of Stock Certificate 244
Title 265, 276
Title Searches 319
Torrens Law 317
Torts 142, 205, 405
Torts of Agent 142
Trade Marks 456
Trade Names 456
Trade, Restraint of 101
Transit, Goods in 362
Transit, Stoppage in 284
Transfer of Property 96
Transfer of Stock 238
Trust, Deeds of 317
Trust Receipts 355
Trustee 250, 251, 252, 253, 340
Trustee in Bankruptcy 432
Trusts 339
Trusts, Voting 215

Ultra Vires 199
Unauthorized Assignment 243
Unconditional Promise 385
Undue Influence 99
Undisclosed Principal 141
Unenforceable Contracts 26
Unfair Competition 457
Uniform Partnership Act 164
Uniform Transfer of Stock 238
Unilateral Contracts 26
Unindorsed Certificate 256
Unliquidated Claim 112
Unliquidated Contracts 59
Use of Language 51
Usury 466

Vendor's Lien 304
Void Contracts 26, 81
Voidable Contracts 26, 66, 78, 81
Voting Trusts 215

Warehouse Receipts 370
Warehousemen 344
Warehouses 344
Warranty 144, 274
Warranty, Breach of 281
Warranty, Implied 277
Warranty of Agent 144
Wife, Husband and 249
Wills 322
Witnessed Power of Attorney 126
Workmen's Compensation Act 154
Writing 67, 72
Written Contracts 38, 72, 113
Written Contracts, Alteration of 113

* * * * * *

Transcriber's note:

Minor inconsistencies in punctuation or hyphenation have been corrected.