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Legal Memorandum: Interpretation of a Contract in CA

Issue: What is the rule that determines the law governing the interpretation of a contract in California?

Area of Law: Business Organizations & Contracts, Litigation & Procedure
Keywords: Interpretation of contract; Place of performance
Jurisdiction: California
Cited Cases: 153 Cal. App. 4th 1436
Cited Statutes: California Civil Code § 1646
Date: 05/01/2008

In Frontier Oil Corp. v. RLI Ins. Co. (2007) 153 Cal. App. 4th 1436, 63 Cal. Rptr. 3d 816, the court engaged in a detailed analysis of conflicts of law in contract disputes.  The court concluded that California Civil Code § 1646 is the choice-of-law rule that determines the law governing the interpretation of a contract.  Id., 153 Cal. App. 4th at 1442-43.  Section 1646 states that a contract is to be interpreted according to the law and usage of the place where the contract is to be performed, but only when the contract “indicates” a place of performance.  Id. at 1443.  Only when the contract does not indicate a place of performance must it be interpreted according to the law and usage of the place where it was made.  Id.   

The parties in Frontier contested whether the contract must explicitly state a place of performance in order to “indicate” one, or whether the place of performance may be inferred.  After an extensive review of relevant authorities, the Frontier court concluded that the choice-of-law rule in Civil Code § 1646 determines the law governing the interpretation of contracts even when no place of performance is specifically “indicated,” but also where it can be determined from the contract that a certain place was contemplated.  Id.  The court specifically noted that, although the governmental interest analysis is applied to determine the choice of law in other contexts, it does not apply in contract disputes.  Id. at […]

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