Also known as:Restatement Second Conflict of Laws § 187 · R2d Conflicts § 187 · § 187 · choice-of-law clause · party autonomy
Written by attorneys · grounded in primary & secondary sources — see below
A rule that validates a contractual choice of the law of a state having a substantial relationship to the parties or the transaction unless the chosen law is contrary to a fundamental policy of the state whose law would otherwise apply under section 188.
Sources & Authorities· 2 primary sources
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Cases
Casebooks
Hornbooks
How it applies
Common Examples
4
Long-Term Contract Supports Chosen Law
Regina Robinson, an Oregon investor, entered a ten-year franchise agreement with Raven Logistics, a Colorado corporation. The contract selected Colorado law and required Robinson to use Raven's Colorado-based booking systems and send fees there. Raven sued Robinson in Oregon for unpaid fees. Robinson argued Oregon law governed despite the clause. The court enforced Colorado law under section 187 because Colorado had a substantial relationship and no fundamental Oregon policy was violated.
Choice-of-Law Clause in Insurance Dispute
Ralph Richardson, a Minnesota resident, obtained an insurance policy from Allstate Insurance Co. after an accident in Minnesota. The policy contained a choice-of-law clause favoring Illinois law. Richardson's estate sued in Minnesota court. Allstate argued Illinois law should govern. The court applied section 187 and enforced Illinois law because Illinois had a substantial relationship and Minnesota had no fundamental policy to the contrary.
Allstate Insurance Co. v. Hague449 U.S. 302, 308 n.11, 101 S.Ct. 633, 638 n.11, 66 L.Ed.2d 521 (1981)
Arbitration Clause Enforced Under Chosen Law
Riley Rivera, a Puerto Rican dealer, signed a distribution agreement with Mitsubishi Motors Corp. that included an arbitration clause and a choice of Swiss law. Rivera later refused to arbitrate antitrust claims. Mitsubishi moved to compel arbitration. The court enforced the clause under section 187 because Swiss law did not violate a fundamental U.S. policy.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.473 U.S. 614 (1985)
Foreign Arbitration Clause Upheld
Raphael Rivera, a New York cargo owner, shipped goods under a bill of lading with Vimar Seguros y Reaseguros that selected Japanese arbitration and Japanese law. After damage occurred, Rivera sued in U.S. court. Vimar moved to compel arbitration. The court enforced the clause under section 187 because Japanese law did not lessen the carrier's liability under COGSA.
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer515 U.S. 528 (1985)
Common questions
Frequently Asked
2
When does section 187 permit enforcement of a contractual choice-of-law clause?+
Section 187 permits enforcement when the chosen state has a substantial relationship to the parties or transaction and the choice does not violate a fundamental policy of the state whose law would otherwise apply under section 188.
Supporting sources
What constitutes a fundamental policy under section 187?+
A fundamental policy must be a substantial one. Requirements such as the statute of frauds rarely qualify, nor do rules that are becoming obsolete.
Supporting sources
449 U.S. 302, 101 S. Ct. 633, 66 L. Ed. 2d 521 (1981)Conflict of Laws
…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…