Legal Definitions - favor solutionis

Favor solutionis is a legal principle primarily used in situations where a contract involves parties from different legal jurisdictions (such as different countries or states). It means that when there is a question about which law should apply to a contract, especially concerning how it should be performed or paid, courts will lean towards applying the law that best allows the contract to be fulfilled or completed.

The core idea behind favor solutionis is to uphold the parties' agreement and ensure that the transaction can proceed as intended, rather than being hindered or invalidated by conflicting legal interpretations. It prioritizes the successful completion or "solution" of the contract.

Here are some examples illustrating this principle:

• International Construction Project: Imagine a construction company based in Canada contracts with a client in Mexico to build a resort in the Dominican Republic. The contract specifies payment milestones and quality standards. A dispute arises regarding the exact definition of "substantial completion" for a payment milestone, as Canadian, Mexican, and Dominican Republic laws might have slightly different interpretations or requirements for construction projects. Applying favor solutionis, a court would likely interpret the contract under the law (from Canada, Mexico, or the Dominican Republic) that allows the project to move forward, the milestone payment to be made, and the construction to be completed, rather than an interpretation that would stall the project or lead to an unresolvable deadlock.

• Cross-Border Technology Licensing: A software company in Ireland licenses its proprietary technology to a manufacturing firm in Germany. The license agreement includes clauses about royalty payments based on sales volume and the method of calculating those sales. A disagreement emerges about whether certain types of indirect sales should be included in the royalty calculation, as Irish and German commercial laws might have different default rules for revenue recognition in licensing agreements. A court applying favor solutionis would seek to interpret the contract under the law (Irish or German) that enables the royalty payments to be calculated and made, thereby allowing the licensing agreement to continue and the technology transfer to remain effective, rather than an interpretation that would make payment impossible or lead to the termination of the license.

• Interstate Supply Agreement: A textile manufacturer in North Carolina agrees to supply a specific type of fabric to a clothing designer in New York. The contract outlines delivery schedules and specifications for the fabric. Due to an unexpected event, the manufacturer faces a delay, and the contract's force majeure clause (which excuses performance due to unforeseen circumstances) becomes relevant. North Carolina and New York state laws might have slightly different precedents or interpretations regarding what constitutes a valid force majeure event and its impact on delivery timelines. Under favor solutionis, a court would likely lean towards the interpretation of the force majeure clause (guided by either North Carolina or New York law) that allows for a reasonable adjustment to the delivery schedule, enabling the fabric to eventually be supplied and the contract to be fulfilled, rather than an interpretation that would immediately terminate the agreement and prevent the transaction from completing.