Also known as: closest relationships · most significant relationship
Written by attorneys · grounded in primary & secondary sources — see below
A criterion for identifying the relevant jurisdiction or place of business by evaluating which has the strongest connection to the contract, performance, or the thing and parties involved.
Claire Campbell, a lender based in State A, held secured interests in artwork stored in State B. After the custodian entered receivership in State B, local creditors challenged her priority. The court weighed the negotiation of the loans, the location of the collateral, and the parties' contacts to select the law of the state with the closest relationship to the artwork and the parties.
Cassandra Cooper purchased land in State B under a contract negotiated in State A that selected State A law. A later buyer in State B who examined local records claimed the interest was invalid. The court applied the law of the state with the closest relationship to the land and the parties, which required following the choice-of-law rules of the situs state.
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The test requires weighing all contacts, including the parties' expectations from the clause, against the strong situs interest in regulating title to land within its borders. When the issue concerns the effect of an unrecorded interest on a subsequent purchaser, the situs state's policies typically predominate.
Yes. When two states maintain identical local rules on the issue, contacts located in both states are treated as if grouped in a single state for choice-of-law purposes.
The location of the thing is an important contact, especially for tangible movables or immovables, but it is not automatically controlling. The court must still determine which state has the closest relationship to the thing and the parties with respect to the particular issue.
…of contracts: “(1) The validity of a contract is determined by the local law of the state with which the contract has its most significant relationship, except in the case of usury (see §334d).” Restatement (Second), Conflict of Laws § 332 (Tent. Draft No. 6, 1960) at 6. The proposed draft also sets out guidelines to determine, in…