Bonython

It gives the second classical definition of the proper law, and the better one, because unlike the other it names a source as well as a function. It is a short chapter: what the course supplies is the formulation, quoted in Delhi Cloth and General Mills Co. v. Harnam Singh.

This course quotes the case within Delhi Cloth and does not set out its facts.

The proper law is the system of law by reference to which the contract was made, or that with which the transaction has its closest and most real connexion.

Step one — notice the two limbs. The first limb — the system by reference to which the contract was made — is the subjective theory: the parties' own choice. The second — the system with which the transaction has its closest and most real connexion — is the objective theory of localisation.

Step two — notice that they are joined by or. The formulation therefore contains the whole ladder in one sentence: the parties choose, and where they have not chosen, connection decides.

Step three — set it beside the localisation formula. Cheshire's version, adopted in Delhi Cloth, is that the proper law is the law of the country in which the contract is localised, its localisation being indicated by the grouping of its elements as reflected in its formation and terms; the country in which its elements are most densely grouped represents its natural seat or centre of gravity. That is the second limb spelled out.

It opens: Define the proper law — pair it with Lord Wright's definition in Mount Albert Borough Council, which states only the function, and say why this one is more useful.

Show the two theories it holds together. The subjective theory answers who chooses the governing law — the parties. The objective theory answers what makes a law the governing law — connection. They are not rival descriptions of one operation but answers to different questions, and English law, with Indian law after it, gives the parties the first word and the court the last: a bona fide express choice prevails, and where there is none the court localises.

Then give the worked example of localisation this course supplies: one party domiciled in France, the other in Italy, the contract made in Italy and performed in Italy, the money payable to a French bank. Italy is where the contract is most densely grouped, so Italian law is the proper law on the localisation theory. Compare The Assunzione, where performance and the currency of payment decided a balanced case.

It does not decide any priority between the two limbs; the ladder supplies that, and the Supreme Court confirms it in NTPC v. Singer Company.