Lex Loci Contractus Law and Legal Definition

Lex loci contractus is the Latin term for "law of the place where the contract is made”. Lex loci contractus is often the proper law to decide contractual disputes. This principle is applicable when there arise a conflict of laws with regard to a contract and when the validity of a contract is in question. It provides the rule that if a contract is valid according to the law of the place where it is formed, it is generally valid everywhere, and vice versa. This rule is not applicable if the contract violates the law of a forum country and law of nature. When a contract is made in one state and it is to be carried out in another state, the law of the place where it is signed is applicable in the construction of the contract, interpretation of the terms and in deciding the validity of the contract. But with regard to the execution of the contract, the law of the state where it is to be carried out applies.