How can an international business contract involve more than one legal system?

An international business contract can involve more than one legal system because legal situations, such as contracts, are often not confined to a single country or jurisdiction. When a transaction involves foreign parties, foreign elements, or multiple jurisdictions, the differences between national legal systems—such as those between common-law and civil-law traditions—create a need for conflict of laws rules to determine which law applies.123

Multiple legal systems may be implicated through several factors:

• Party Autonomy: Most countries recognize the freedom of parties to choose the law that will govern their contract.4
• Closest Connection: In the absence of a choice by the parties, courts often look for the legal system with the "closest connection" to the transaction. This is determined by factors such as the place of business, the language used in negotiations, the currency of payment, and the location of performance.4
• Jurisdictional Claims: The courts of each involved country may claim jurisdiction over the matter, and the laws of each country may be applicable under certain circumstances.1

While some international treaties or customs like the lex mercatoria may harmonize rules, legal systems remain diverse, necessitating these conflict-resolution processes.45