Allen, James D.

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University of Kentucky

Kentucky Law JournalVolume 28 | Issue 1 Article 91939Conflict of Laws--What Law Governs the Validityof a Contract in KentuckyJames D. AllenUniversity of KentuckyFollow this and additional works at: https://uknowledge.uky.edu/kljPart of the Conflict of Laws Commons, Contracts Commons, and the State and LocalGovernment Law CommonsRight click to open a feedback form in a new tab to let us know how this document benefitsyou.This Note is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal byan authorized editor of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu.Recommended CitationAllen, James D. (1939) "Conflict of Laws--What Law Governs the Validity of a Contract in Kentucky," Kentucky Law Journal: Vol. 28 :Iss. 1 , Article 9.Available at: https://uknowledge.uky.edu/klj/vol28/iss1/9KENTUCKY LAW JOURNALitself could ordinarily exercise.? Having enacted legislation whichsets up a definite standard, the legislature may delegate the power ofmaking rules and regulations to administrative bodies, the administra-tive function consisting of filling in the details not embodied in thenecessarily general standard.? In Kentucky, the delegation of rule-making and rate-fixing powers to boards or commissions is valid."The Kentucky court sanctions the delegation of this power to fill inthe details, saying that they are "purely administrative" rather thanlegislative.25With the expanding social legislation in keeping with the need forsuch enactments, neither the doctrine of separation of powers nor themaxim, delegata potestas non potest delegari, is strictly enforced. Thetrend of the courts in the United States is indicated by the opinion ofMr. Justice Holmes in Springer v. Government of the PhilippineIslandse where he said that the doctrine of separation of powers is notintended "to divide the branches into water-tight compartments" butrather to afford an essential working principle to be applied practicallyin a practical world. PHLI ScHIFCONFLICT OF LAWS-WHAT LAW GOVERNS THE VALIDITYOF A CONTRACT IN KENTUCKY.The American courts have adopted at least three different rulesin determining the law of what place should govern the validity of acontract. The rules so adopted are: (1) That the law of the place of"Marshall, C. J., in Wayman v. Southard, 10 Wheat. 1, 42 (1825)said: "Congress may certainly delegate to others the powers which itmay rightfully exercise itself." Accord, Bay City First National Bankv. Fellows, 244 U. S. 416, 61 L. Ed. 1233, 37 S. Ct. 734 (1917); Peoplev. Roth, 294 Ill. 532, 94 N. E. 953 (1911); State Racing Comm. v.Latonia Agricultural Assn., 136 Ky. 173, 123 S. W. 681 (1909); StateBoard of Charities & Corrections v. Hays, 190 Ky. 147, 227 S. W. 282(1920); McKenny v. Farnsworth, 121 Me. 450, 118 Atl. 237 (1922);Comm. v. Sisson, 189 Mass. 247, 75 N. E. 619; Village of SaratogaSprings v. Saratoga Springs Gas, Electric Light & Power Co., 191 N. Y.123, 83 N. E. 693 (1908).2 Village of Saratoga Springs v. Saratoga Springs Gas, ElectricLight & Power Co., szapra n. 22.21 L. & N. R. Co. v. Greenbrier Distillery Co., 170 Ky. 775, 187 S. W.296 (1916); Hunter v. City of Louisville, 204 Ky. 562, 265 S. W. 277(1924); Estes v. State Highway Comm., 235 Ky. 86, 29 S. W. (2d)583 (1930).2 Estes v. State Highway Comm., supra n. 24. See also Klein v.City of Louisville, 224 Ky. 624, 6 S. W. (2d) 1104 (1928); Bell's Com-mittee v. Board of Education of Harrodsburg, 192 Ky. 700, 234 S. W. 311(1921); Lawrence County v. Lawrence County Fiscal Court, 191 Ky.45, 229 S. W. 139 (1921).20277 U. S. 189 at 211, 72 L. Ed. 853 at 855 (1928).For a very recent case, decided after this note was written, andbearing out the reasoning and contentions of the writer, see KnoxvilleHousing Authority, Inc. v. City of Knoxville et al., - Tenn. -, 123S. W. (2d) 1085 (1939) and cases cited therein.STUDENT NOTESmaking governs; (2) That the law of the place of performance gov-erns; and (3) That the law intended by the parties should govern.tThis confusion of rules not only exists among the various states butoften among the cases of a particular state.2 An examination showsthat this confusion of rules exists in the Kentucky cases, and that atone time or another the Kentucky court has adopted all three rules.At the outset it should be indicated that while the Kentucky casesare in confusion in regard to the rules set out above, they are in accordwith respect to certain matters pertaining to the validity and enforce-ment of foreign contracts. Kentucky follows the general rule of Con-flict of Laws that if to enforce the contract, although valid where made,would be against the public policy of the law of Kentucky, the contractwill not be enforced in Kentucky.' The cases are also in accord thatIf the contract Is void where made it is void everywhere else.' Thirdly,Kentucky follows the general rule that the law of the forum governsas to procedural matters such as pleadings, evidence and type ofjudgment.5One group of Kentucky cases follows the rule, as set out above,that the law Intended by the parties should govern the validity of thecontract.6 Under this rule regardless of where the contract was madeor to be performed that law shall determine its validity which theparties intended to govern. In Glenny Glass Co. v. Taylor a note wasmade in Washington, D. C., and was made payable in New York. Thedefendant signed the note in Kentucky and the court held that the lawof Kentucky should govern the validity of the contract because thatwas clearly the law by which the defendant intended to be bound. Inthe Redwine Cases it was clear that the person who made the contractI Goodrich, Conflict of Laws (1927) 228; 2 Beale, Treatise on theConflict of Laws (1935) 1079.2 Developments-Conflict of Laws (1937) 50 Harv. L. R. 1159.1 Union Cent. Life Ins. Co. v. Spinks, 119 Ky. 261, 83 S. W. 615(1904). See also Barbee and Co. v. Bevins, Hopkins and Co., 176 Ky.113, 195 S. W. 154 (1917); Herold Motor Car Co. v. Comm., 216 Ky.335, 287 S. W. 939 (1926).'Ford v. Buckeye State Ins. Co., 69 Ky. 133, 99 Am. Dec. 663(1869); Ohio and Miss. R. R. v. Tabor, 98 Ky. 503, 32 S. W. 168 (1895);Orr's Admr. v. Orr, 157 Ky. 570, 163 S. W. 757 (1914). The rule is basedon the theory that if an act could have no legal effect in the state whereIt occurred it could have no legal effect elsewhere.I Graves v. Graves, 5 Ky. 207, 4 Am. Dec. 697 (1810); Fry Bros.v. Theobald, 205 Ky. 146, 265 S. W. 498 (1924); Pinson v. Murphy, 220Ky. 464, 295 S. W. 442 (1927); Traveler's Ins. Co. v. Mahan, 273 Ky. 691,117 S. W. (2d) 909 (1938). This is a logical rule in view of the factthat by asking the aid of the court the parties must accept its proce-dural rules, and furthermore, the court is geared to its own procedureand can best apply the rules regulating it.6 Glenny Glass Co. v. Taylor, 99 Ky. 24, 34 S. W. 711 (1896); Cleve-land, C., C., and St. Louis Ry. Co. v. Druien, 118 Ky. 237, 80 S. W. 778(1904); Redwine's Ex. v. Redwine, 160 Ky. 282, 169 S. W. 864 (1914).99 Ky. 24, 34 S. W. 711 (1896).'160 Ky. 282, 169 S. W. 864 (1914)KENTUCKY LAW JOURNALintended for the law of Kentucky to govern its validity even thoughthe contract was made in Florida.The most serious objection to permitting the law intended by theparties to govern the validity of the contract is that very often thisintention is hard to discover, or it may be that there was no intentionat all expressed. The rule, moreover, is subject to several presump-tions which only tend to confuse the general rule.9 Most important ofthese presumptions as set out by the Kentucky court is that in theabsence of any expressed intention to the contrary, it will be presumedthat the place of performance shall control20 To add further confusionto the problem the court in Cleveland, C., C., and St. Louis Ry. Co. vDruiene imposed an exception to the presumption just stated. In thatcase a contract was made in Illinois whereby the railroad agreed toship mules to Kentucky for Druien. The contract limited liability fromloss by fire which limitation was valid in Illinois. The mules wereburned to death in Illinois and Druien sued for their value in Kentuckywhere a common carrier cannot limit his liability by contract. Thecourt held that ordinarily the law of Kentucky would govern the matterbecause there was no expression of intention as to what law shouldgovern, but since the contract was to be partly performed in Illinoisthe law of that state should control as to the damages arising there.The court said that since the railroad knew the limitation was void inKentucky it must have intended it to govern only to the part of thecontract to be performed in Illinois.A second group of cases adopt the rule that the law of the placewhere the contract is to be performed shall determine its validity."The rule as stated in Howard v. Western Union Telegraph Co." is that,S..where contracts are made in one place to be performed inanother, they are to be governed by the law of the place of perform-ance." The rule would seem to be based on the theory that when theparties drew up the contract they kept in mind the law of the placewhere the contract was to be performed and necessarily expected thatlaw to apply.14 The rule that the place of performance shall govern Isalso subject to presumptions. It has been held in Kentucky that unlessit is otherwise shown by the contract, the place of making will be'Goodrich, Conflict of Laws (1927) 228."Short and Co. v. Trabue & Co., 61 Ky. 269 (1863); TwentiethSt. Bank v. Diehl, 260 Ky. 359, 85 S. W. (2d) 865 (1935). And see NewDomain Oil and Gas Co. v. McKinney, 188 Ky. 183, 221 S. W. 245(1920). In Western Union Telegraph Co. v. Lacer, 122 Ky. 839, 93 S. W.34 (1906) the court said that the parties must be conclusively presumedto have intended that the law of the place where the breach occurredshould govern the validity of the contract."118 Ky. 237, 80 S. W. 778 (1904).2Goddin v. Shipley, 46 Ky. 575 (1847); Young v. Harris, 53 Ky.447 (1854); Stevens v. Gregg, 10 Ky. L. Rep. 267 (1888); Howard vWestern Union Telegraph Co., 119 Ky. 625, 86 S. W. 982 (1905); MillerBros. v. Blackburn Coal Co., 212 Ky. 447, 279 S. W. 618 (1926)"119 Ky. 625, 86 S. W. 982 (1905).21 See note 12, supra.STUDENT NOTESdeemed to be the place of performance and as a result the law of theplace of making will govern." As a necessary corollary, if the contractis made in the state in which it is to be performed the law of that statewill govern its validity."The majority of Kentucky cases adopt the rule that the place wherethe contract was made should govern its validity.1 The rule is wellstated in Groves v. Graves" where the court said, "With respect to thenature and construction of contracts, and the rights and obligations ofparties arising out of them, the principle is well settled, that the lawof the place where the contract was made is to govern . . ." In FryBros. v. Theobald" the court said, ". . . the authorities are uniformIn holding that the validity of the contract is to be determined by thelaw of the state in which it is made . . ."In Western Union Telegraph Co. v. Lacer the court adopted afourth rule and applied it to the particular facts of that case. Therethe court held that where the contract is to be performed partly in onestate and partly in another state the law of the place where the breachoccurred should govern the validity of the contract.Most writers agree that the better rule is that the law of the place2 Short and Co. v. Trabue and Co., 61 Ky. 269 (1863); New DomainOil and Gas Co. v. MIcKinney, 188 Ky. 183, 221 S. W. 245 (1920). Inthe New Domain case the court confused the rule that the place of per-formance should govern with a rule that ". . . when made by onehaving a regular domicile, it will be presumed that the law of the placeof his domicile shall govern the validity of the contract . . ." Thereis, however, no other Ky. case which indicates that the law of the domi-cile might govern.'6Johnson v. Bank of U. S., 41 Ky. 310 (1842); Stevens v. Gregg,10 Ky. L. Rep. 267 (1888); Arnett v. Pinson, 33 Ky. L. Rep. 36, 108 S. W.852 (1908); Elswick v. Ramey. 157 Ky. 639, 163 S. W. 751 (1914);Cooper's Admr. v. Lebus' Admr., 262 Ky. 245, 90 S. W. (2d) 33 (1935).17 Graves v. Graves, 5 Ky. 207, 4 Am. Dec. 697 (1810); Steele v.Curle, 34 Ky. 381 (1936); Thomas v. Beckman, 40 Ky. 29 (1840);Archer v. National Ins. Co., 65 Ky. 226 (1867); Hyatt v. Bank of Ky.,71 Ky. 193 (1871); Gibson v. Sublett, 82 Ky. 596, 6 Ky. L. Rep. 645(1885); Young's Trustee v. Bullin, 19 Ky. L. Rep. 1561, 43 S. W. 687(1897); Arnett v. Pinson, 33 Ky. L. Rep. 36, 108 S. W. 852 (1908);Clary v. Union Cent. Life Ins. Co., 143 Ky. 540, 136 S. W. 1014 (1911);Smith v. B. and 0. R. R. Co., 157 Ky. 113, 162 S. W. 564 (1914); FryBros. v. Theobald, 205 Ky. 145, 265 S. W. 498 (1924); Traveler's Ins.Co. v. Mahan, 273 Ky. 691, 117 S. W. (2d) 909 (1938). Beale says thatthe general rule in Kentucky is that the law of the place of performanceshall govern. 23 Harv. L. t. 7, 96 (1910). This statement was basedon a few earlier cases and is apparently not true today.5 S Ky. 207, at 208, 4 Am. Dec. 697 (1810).205 Ky. 146, 148, 265 S. W. 498 (1924).3122 Ky. 839, 93 S. W. 34 (1906). "A contract made in one stateto be performed partly where made and partly in another state, shouldbe construed, in fixing a liability for its breach, according to the lawsof the jurisdiction where the breach occurred; . . ." See also Cleve-land, C., C., and St. Louis Ry. Co. v. Druien, 118 Ky. 237, 80 S. W. 778(1904).KENTUCKY LAW JOURNAL,where the contract was made should govern its validity,2 ' and thisseems to be the modern weight of authority." The rule is based onsound principles of law most important of which is that only by thelaw of the place where the acts took place could it be determinedwhether they had any legal effect." In other words, unless the actsof the parties had the legal effect of creating a contract in the statewhere they occurred there could be no contract to enforce in anotherstate. Furthermore, as a practical matter, the easiest law to apply isthat under which the parties acted because, having determined wherethe contract was made, that law follows as a part of the contract.,And lastly, this rule entails none of the uncertainties which follow therule that the place of performance shall govern or the rule that theintention of the parties should control. If the intention of the partiesis to govern there might be a conflict of evidence on the matter, or aconflict of intention, and the court would be forced to choose betweenconflicting laws. If the law of the place of performance is to governthe performance might extend over two or more jurisdictions there-fore causing a conflict as to what law should be applied. But when thecourt has determined where the contract was made, which must neces-sarily be a particular jurisdiction, there can be no uncertainty as thereis only one law to apply, namely that where the contract was made.Therefore it is submitted that in all future cases the Kentucky courtshould determine the validity of the contracts before it according to thelaw of the place where the contract is made.JAEs D. ALLENMARRIED WOMEN'S SURETYSHIP CONTRACTS IN THE UNITEDSTATES.The married woman's contractual disabilities have been removedto varying degrees in most American jurisdictions. Upon examinationof the statutes, virtually the only limitatlon upon the total removalof these disabilities seems to be as to a married woman's capacity tobe a surety. It is the purpose of this note to discuss the capacity ofmarried women to be sureties in the various states."Stumberg, Conflict of Laws (1937) 201 where he cites Beale,Goodrich and Minor as supporting the rule. Stumberg seems to dis-agree with the rule, 204-207. Restatement, Conflict of Laws (1934)sec. 332 adopts the rule that the law of the place where the contractis made should govern its validity.22 See Goodrich, Conflict of Laws (1927) 220.22 Beale, Conflict of Laws (1935) 1090; Goodrich, Conflict of Laws(1927) 229, "It takes the sanction of the law plus the acts of the partiesto complete the contract."'2 Beale, op. cit. 8 upra note 23, at 1091.'Western Union Telegraph Co. v. Lacer, 122 Ky. 839, 93 S. W. 34(1906) shows the difficulty.

Conflict of Laws--What Law Governs the Validity of a Contract in Kentucky

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Conflict of Laws--What Law Governs the Validity of a Contract in Kentucky

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