Proper Law
The system of law with which a contract has its closest and most real connection. Under Rome I Regulation, determined by party choice or, failing that, objective connecting factors.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
The 'proper law' of a contract is the system of law that governs its interpretation, performance and validity. Where the parties have chosen a governing law in their contract, that choice generally prevails. Where they have not, Article 4 of Regulation (EC) No 593/2008 (Rome I) supplies a structured set of default rules rather than leaving the court to search at large for the law with the 'closest connection'. Article 4(1) sets out categories tied to the type of contract — for example, a contract for the sale of goods is governed by the law of the country where the seller has habitual residence, and a contract for the provision of services by the law of the country where the service provider has habitual residence.
Where a contract does not fit any of the specific categories in Article 4(1), or falls into more than one of them, Article 4(2) supplies a general fallback: the contract 'shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.' This 'characteristic performance' test looks to whichever party's obligation gives the contract its distinctive character — typically the party supplying the goods or services, rather than the party simply paying money for them.
Both of these rules can be displaced. Article 4(3) provides that 'where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply' — an escape clause preserving the older common-law idea that the proper law should ultimately reflect the country with the closest real connection to the transaction. And if the applicable law cannot be determined under either of the earlier tests, Article 4(4) falls back on 'the law of the country with which it is most closely connected.'
Example
A UK company supplying software services to a client in Germany, with no express choice-of-law clause in the contract, would have the proper law determined by Article 4(1)(b) of Rome I as the law of the country where the service provider — the UK company — has its habitual residence, i.e. English law.
Related terms
Official sources
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