Choice-of-law clauses in contracts Choice of law that validates contracts – Could be used even when no choice-of-law provision exists – Could be used to choose law other than that identified in choice-of-law provision

choice of law clauses

Rest 2d § 188. Law Governing In Absence Of Effective Choice By The Parties (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6. … (3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ and 203.

Rest 2d § 187. Law Of The State Chosen By The Parties (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

- Two NY’ers enter into a contract in NY with performance in NY - one is 17 years old - under NY law any contract entered into by a 17 year old is voidable - assume the contract contains a provision saying that the contract is not voidable by the 17 year old – what result? - assume the contract contains a PA choice-of- law provision and under PA law contracts with 17 year-olds are not voidable – what result?

- A 17-year-old NY’er and a Pennsylvanian enter into a contract in NY with performance in PA - under NY law any contract entered into by a 17 year old is voidable - assume the contract contains a PA choice-of-law provision and under PA law contracts with 17 year-olds are not voidable – what result?

Seigelman v. Cunard White Star Line (2d Cir 1955)

187(3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law.

187(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

Mass Insurer contracts with NH insured K says law of Mass applies K entered into in NH insured misstates the distance of house from fire hydrant house burns down under law of Mass, no rights under K because of misstatement under law of NH, still has rights assume that most significant relationship is with NH law

P (Mass) and D (Maine) enter into a contract in Maine with performance in Maine The contract says that the law of Mass applies Under Mass law D has no capacity to contract, because she is a married woman Under Maine law, she has such a capacity

On occasion, the parties may choose a law that would declare the contract invalid. In such situations, the chosen law will not be applied by reason of the parties' choice. To do so would defeat the expectations of the parties which it is the purpose of the present rule to protect. The parties can be assumed to have intended that the provisions of the contract would be binding upon them. If the parties have chosen a law that would invalidate the contract, it can be assumed that they did so by mistake. If, however, the chosen law is that of the state of the otherwise applicable law under the rule of § 188, this law will be applied even when it invalidates the contract. Such application will be by reason of the rule of § 188, and not by reason of the fact that this was the law chosen by the parties.

interest analysis

- P (NY) is suing D (NY) concerning a car accident in New York, under a law providing for treble damages for accidents on highways - D, appeals to a law limiting recovery to $10,000 when against police officers who were acting in the course of his duty

- One statute says vehicles are not allowed in the park - Another statute says children must be in strollers

false conflicts

- P (NY) sues D (NY) concerning a car accident in NY - NY has law saying anyone who is grossly negligent shall be liable for harm - NJ has law saying anyone who is negligent shall be liable for harm

– Millikan v Pratt Mass D contracted with Maine Ps to guarantee D’s husband’s payment Sent by her husband by mail from Mass to Maine D’s husband did not pay Ps demanded of D She refused Mass had law not allowing married women to contract as surety Maine didn’t

true conflicts

Schmillikan v Schmratt Maine D contracted with Mass Ps to guarantee D’s husband’s payment Sent by her husband by mail from Maine to Mass D’s husband did not pay Ps demanded of D She refused Mass had law not allowing married women to contract as surety Maine didn’t

false conflicts

Babcock v. Jackson (NY 1963) NY P – guest in car w/ NY D Crashed into stone wall in Ontario Does Ontario’s guest statute apply?

Dym v Gordon (NY 1965) P and D both NY domiciliaries BUT taking courses at U of Colo Collision with another vehicle (from Kansas) in Colo Does Colo guest statute apply?