Also known as: choice of law clause · choice-of-law clauses · choice of law clauses · governing law clause · choice of law provision
Written by attorneys · grounded in primary & secondary sources — see below
A contractual provision by which the parties designate the jurisdiction whose law will govern any disputes that may arise between the parties. The clause signals the parties' expectation that the chosen state's substantive rules will control contract interpretation and performance obligations.
Select any source to read its text and confirm it supports the definition.
Crestview Holdings, a Florida corporation, entered a ten-year franchise agreement with Cameron Cruz, a Michigan resident, requiring royalty payments to Florida and ongoing operational oversight from Florida headquarters. The agreement contained a Florida choice-of-law clause. When Crestview sued Cruz in Florida for unpaid royalties, the court found the clause contributed to minimum contacts supporting personal jurisdiction over Cruz.
Copperfield Mining, a Japanese manufacturer, contracted with Cascade Manufacturing, a Puerto Rican dealer, for vehicle distribution. The agreement included both an arbitration clause and a Swiss choice-of-law clause. When Cascade asserted U.S. antitrust claims, the clause directed the tribunal to apply Swiss law to contractual issues while preserving the statutory claims for arbitration.
Phillips Petroleum entered royalty agreements with thousands of owners across multiple states without any choice-of-law clause. When a class action was filed in Kansas, the absence of a clause allowed the court to apply Kansas law to all claims after finding sufficient contacts, rather than requiring individualized state-law analysis for each owner.
Allstate Insurance issued a policy to a Wisconsin resident without a choice-of-law clause. After the insured's death in Minnesota, the Minnesota court applied its own law to stack coverage because the insurer had anticipated nationwide accidents and maintained substantial contacts there, rather than defaulting to Wisconsin law.
American Express entered merchant agreements containing arbitration clauses and New York choice-of-law provisions. When restaurants challenged the clauses as preventing effective vindication of federal antitrust claims due to high costs, the Court enforced the clauses because the chosen law did not prospectively waive statutory remedies.
A carrier issued a bill of lading for cargo shipped from the United States containing both an arbitration clause and a Japanese choice-of-law clause. When cargo damage occurred, the clause was upheld and the dispute sent to arbitration in Japan, with the chosen law governing interpretation of the carriage contract.
No. A choice-of-law clause is relevant to the purposeful-availment inquiry but is never dispositive. Courts examine the clause together with other contract terms showing a long-term, interdependent relationship and contemplated future consequences in the forum.
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The clause is one factor a federal court considers when applying the forum state's choice-of-law rules. The court must follow the forum state's conflicts methodology, which may or may not honor the parties' designation depending on contacts and public policy.
…law was applied). At the same time, Allstate did not seek to control construction of the contract since the policy contained no choice-of-law clause dictating application of Wisconsin law. See Clay II, supra , at 182 (nationwide coverage of policy and lack of choice-of-law clause). [^maj-25]: Justice Black’s dissent in the first Clay…
…judgment). Additionally, it is easy enough for national firms like Phillips to make clear their expectations by placing express choice-of-law clauses
…action on the claimant's capacity to reinitiate suit in federal court. We merely note that in the event the
…of credit posted in Galaxie's favor. Among the rights and responsibilities set out in the bill of lading were arbitration and choice-of-law clauses
…That case involved a contract between an automobile manufacturer and a dealer that contained both an arbitration clause
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No. Even when a clause is otherwise valid, a court may refuse to apply the chosen law if doing so would violate a fundamental policy of a state with a materially greater interest in the issue.
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A choice-of-law clause selects the substantive rules that will govern the dispute. A forum-selection clause designates the court or arbitral tribunal in which the dispute must be heard and can independently support personal jurisdiction when enforced.
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No. Courts may still apply the law of a state with the most significant relationship to the parties and transaction even without an express clause, provided constitutional fairness requirements are satisfied.
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