Question

Choice of Law: Lex Contractus

Scenario:

Tom, a Filipino citizen, entered into a contract with Sarah, a German citizen, for the sale of a property located in the Philippines. The contract stipulated that the laws of Germany shall govern any disputes arising from the contract.

During the performance of the contract, a dispute arose between Tom and Sarah regarding the payment terms. Tom insisted on the application of Philippine laws, while Sarah argued that German laws should be applied based on the choice of law clause in the contract.

Question:

1. In this scenario, what law should govern the contract between Tom and Sarah? Discuss the principles of lex contractus and the factors courts consider in determining the applicable law in contracts with a choice of law clause.