Suppose you are driving through the mountains of Colorado and get into a fender-bender with a driver from Massachusetts. Which state’s law governs the rights of the parties? Is it the law of Pennsylvania? Colorado? Massachusetts?
Enter the doctrine of lex loci, otherwise known as the law of the place. In cases involving personal injury the rights of the parties generally will be governed by the state where the injury occurred unless it can be shown that some other state has a more significant interest in the outcome of the dispute. In cases involving contract disputes, however, modern decisions reflect the notion that the place of making of the contract may be less important than the place of contract performance or the place where payment is due. These cases apply the law of the state having the most significant relationship with the transaction regardless of where the contract was entered into.
– BBC&B