Barrister and Solicitor
Legal Writing and Research
Contracts - Substantive Law - Jurisdiction
Lilydale Cooperative Limited v. Meyn Canada Inc. (Ont CA, 2015)
In this case the Court of Appeal stated as follows on the test for determining which jurisdiction's substantive law applied to a contract:
 Meyn and Lilydale did not include in their contract a clause for the law that would govern disputes between them. Absent such a clause, the motion judge applied the test first set out by the Supreme Court of Canada nearly 50 years ago in Imperial Life Assurance Co. of Canada v. Segundo Casteleiro Y Colmenares, 1967 CanLII 7 (SCC),  S.C.R. 443. All parties agreed that this was the appropriate test. In Colmenares, relying on English authority, Ritchie J. set out the closest and most real or most substantial connection test, at p. 448:
It now appears to have been accepted by the highest Courts in England that the problem of determining the proper law of a contract is to be solved by considering the contract as a whole in light of all the circumstances which surround it and applying the law with which it appears to have the closest and most substantial connection. For the criteria that inform this test, Ritchie J. turned to Cheshire’s text on private international law:
This test was adopted by the Privy Council in Bonython v. Commonwealth of Australia,  A.C. 201, where Lord Simonds said at p. 219:
... the substance of the obligation must be determined by the proper law of the contract, i.e., the system of law by reference to which the contract was made or that with which the transaction had its closest and most real connexion.
The many factors which have been taken into consideration in various decided cases in determining the proper law to be applied, are described in the following passage from Cheshire on Private International Law, 7th ed., p. 190: The motion judge focused on four criteria: the nature and subject matter of the contract, the place of performance of the contract; the place of contracting, and the domicile and residence of the parties. The motion judge’s finding that the place of contracting was neutral is not contested on this appeal. Her findings on the other three criteria are in issue. I turn to them now. I do so with the standard of appellate review in mind. The motion judge’s balancing of the four criteria she considered called for the exercise of her discretion. Unless, in exercising her discretion, she made an error of law or an unreasonable finding of fact or balanced the criteria in an unreasonable way, this court should not interfere.
The court must take into account, for instance, the following matters: the domicil and even the residence of the parties; the national character of a corporation and the place where its principal place of business is situated; the place where the contract is made and the place where it is to be performed; the style in which the contract is drafted, as, for instance, whether the language is appropriate to one system of law, but inappropriate to another; the fact that a certain stipulation is valid under one law but void under another … the economic connexion of the contract with some other transaction … the nature of the subject matter or its situs; the head office of an insurance company, whose activities range over many countries; and, in short, any other fact which serves to localize the contract.