Brief Fact Summary
Pritchard (Plaintiff) had gratuitously become a surety on an appeal bond relating to a Louisiana judgment rendered against a railroad.Â Pritchard (Plaintiff) had contracted with Norton (Defendant) in New York for Norton (Defendant) to indemnify Plaintiff for any loss on the surety.
Synopsis of Rule of Law
Where the parties do not specify which law will be controlling if a dispute should occur in a multistate contract, the terms of the contract and the obligations it imposes will be examined to conclude the intent of the parties.
Pritchard (Plaintiff) had obligated himself in Louisiana to be a surety on an appeal bond required to be posted by a railroad in its appeal of an adverse Louisiana judgment.Â Norton (Defendant) and Pritchard (Plaintiff) contracted in New York for Defendant to indemnify Plaintiff against any loss in connection with his suretyship.Â The railroad lost the appeal and Plaintiff was called upon to satisfy the bond.Â Defendant refused to indemnify on the grounds that New York law did not recognize the validity of the indemnity contract.Â Plaintiff claimed that since performance was to be in Louisiana, which recognized the contract, Louisiana law should apply.Â The trial court rendered a verdict in favor of Norton (Defendant) based on his contention.
Where the parties do not specify which law will be controlling if a dispute should occur in a multistate contract, may the court use the circumstances of the contract to conclude an intent?
(Matthews, J.)Â Yes.Â Where the parties do not specify which law will be controlling should a dispute occur in a multistate contract, the court may use the circumstances of the contract to conclude an intent.Â It must be presumed that parties to a contract will not enter into an agreement that is not enforceable.Â Since the surety of Pritchard (Plaintiff) arose in Louisiana and any indemnity payment must be made there, the law of Louisiana must have been intended by the parties to be applicable.Â Where an obligor assumes an obligation, he must intend that the law that would uphold the obligation will be controlling in the event of a dispute over performance.Â The place of the contracting will not be material where it is different than the place of performance.Â Reversed with directions to grant a new trial.
The decision appears to rest on the doctrine of validating a contract wherever possible.Â Since persons who enter into a contract expect the contract will be fulfilled, they do not, in reality, intend any law to govern disputes.Â The Court’s decision and rationale would allow the courts to choose whichever law the courts thought should apply when resorting to the legal fiction of inferring the parties’ intent.