Also known as: applicable laws in contract cases · choice of law · governing law · lex contractus
Written by attorneys · grounded in primary & secondary sources — see below
A rule for determining which jurisdiction's substantive law governs the rights and duties of parties to a contract when the transaction involves contacts with multiple states. The rule first honors an effective choice of law by the parties. In the absence of such a choice the rule selects the local law of the state with the most significant relationship to the transaction and the parties.
Arcadia Retail, incorporated in State A, contracted with Apollo Energy, a State B firm, for delivery of fuel to stores in both states. Arcadia sued Apollo in federal court in State A for breach. The court applied State A's choice-of-law rules to decide whether State A or State B law measured the seller's performance obligations.
Anchor Bank in State X sold specialized equipment to Argonaut Shipping, headquartered in State Y, with delivery and payment occurring in State Z. When a dispute arose over title and risk of loss, the court weighed the contacts listed in the Restatement factors to identify the state whose law had the most significant relationship to the sale.
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Austin Abbott executed a will in State P that contained a contractual promise to transfer land located in State Q to his niece Abigail Alvarez. After his death the niece sought enforcement in State R. The court checked whether the execution satisfied the law of the place of execution, the testator's domicile, or the place of the land.
Anika Anand, a State M resident, sued Alexis Archer, a State N resident, in federal court in State M for an accounting under a joint-venture agreement performed in both states. The court treated the accounting rules as substantive and therefore followed State M's choice-of-law rules to select the governing law.
Adam Anderson contracted with Amber Alonzo to build a warehouse spanning State C and State D. Anderson sued in federal court in State C alleging breach. The court refused to follow a State C procedural rule that would have removed the contract issues from the jury because doing so would alter the essential character of the federal proceeding.
Apollo Energy purchased a policy from Hartford Fire Insurance Co. covering risks in multiple states. When a coverage dispute arose, the court examined whether the parties' contacts and the policy's center of gravity pointed to one state's law or permitted application of the law chosen in the policy.
The court applies the choice-of-law rules of the state in which it sits. Those rules are treated as substantive under Erie, so the federal court follows the forum state's conflict rules rather than creating its own.
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The court identifies the state with the most significant relationship to the transaction and the parties by evaluating the place of contracting, place of performance, location of the subject matter, and the domiciles and places of business of the parties.
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A court honors the parties' choice unless it lacks a reasonable basis or violates a fundamental policy of a state with a materially greater interest that would otherwise supply the governing law.
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…center of gravity' of the controversy, or the most convenient location for litigation. The issue is personal jurisdiction, not choice of law. It is resolved in this case by considering the acts of the [appellants]." Hanson v. Denckla , 357 U. S. 235, 254 (1958). Appellee suggests that by accepting positions as officers or…