A more thorough explanation:

Definition: Lex loci contractus is a Latin term that refers to the law of the place where a contract is executed or to be performed. It is often the proper law by which to decide contractual disputes.

For example, if a contract is signed in New York and is to be performed in California, the lex loci contractus would be California law. This means that any disputes arising from the contract would be resolved according to California law.

The lex loci contractus controls the nature, construction, and validity of the contract. It is important because it allows citizens of one country to safely contract and carry on commerce in the territories of another.