Perfecting Choice of Law and Choice of Forum Clauses: Scope of Capture, Conflict of Laws, Renvoi, and Best Practices

Description

While choice of law clauses have been used since the first half of the twentieth century, they were not widely used before 1960. Today such provisions are ubiquitous and are found in most commercial contracts. Choice of law clauses are meant to reduce litigation costs and promote litigation efficiency.

There are a number of recurring issues in drafting these provisions. Unsolved problems or unintended outcomes detract from the key purpose of promoting predictability. Language matters--some courts have held that a contract "interpreted" under the state's laws is different from a contract "governed" under that state’s law.

Whether or not a choice of law clause selects the tort and statutory law of a chosen jurisdiction, language limiting the provision to claims for breach of contract may require tort claims to be brought separately, and in another state, than the contract claims.

The courts have generally held that choice of law clauses only operate to select the substantive law of the chosen jurisdiction. However, when a particular issue straddles the line between substance and procedure, the question becomes more difficult. Does a clause that selects the "laws" of a state select the statute of limitations of that state? Some view this as procedural, others as substantive.

Often choice of law clauses provide that the laws of a particular state govern "without regard to its conflict of laws rules," but interpreting this remains unclear. There are limited court decisions interpreting a choice of law provision to select the whole law of the chosen jurisdiction.

When a choice of law clause selects the "laws" of a particular state, a question naturally arises whether the parties to the contract also intended to select any relevant provisions of federal law, or even foreign law.

Listen as our expert panel advises counsel on the unique considerations of drafting optimal choice of law and choice of forum clauses that address as many concerns as possible and reduce the likelihood of collateral litigation.