Email list hosting service & mailing list manager

Choice of Law Provisions and Venue Provisions in Contracts Deborah Everds 03 Apr 2000 13:57 EST

Conflicts of Law is actually a very complicated area of law, and not as
straightforward as it appears.  Below is an analysis of Choice of Law and
Venue considerations in Contracts that I sent to one of the Consulting

In contracts where there is no choice of law by the parties, Courts look
their state's conflict of laws to determine which state law should govern.
In Federal District Court, the Court will look to the state's conflict laws
in which the court resides.

Most state's look at the factors set forth in the Restatement (Second) of
Conflict of Laws to determine which state law should govern contracts where
there is no choice of law provision.

A typical provision I would put in clinical trial contracts I negotiated
was "this agreement shall be deemed to be made in, and in all respects
shall be interpreted, construed and governed by and in accordance with the
law of (State), without regard to the conflict of law principles of (State).

Typically when Court's interpret a contract, they ascertain the intent of
the parties, and give effect to those intentions.  As long as the contract
is unambiguous, the intent of the parties will be determined from the
contract alone.  As long as the choice of law is not arbitrary, in that
there is some reason for choosing that state's law, e.g., one of the
parties to the contract resides, the state is the place of performance, or
the state is the place where the contract was formed, or is the state where
the contract is to be performed, the choice of law provision should be
enforced by the courts.

If for instance, the contract merely states that the contract shall be
governed by the laws of the state of X, Courts will look to State X
conflict law, conduct a conflicts analysis, and determine whether State X
law is to be applied when construing the contract.  For instance, Illinois
follows the Restatement (Second) of Conflict of Laws, and so the Court
would look to the Restatement Second to determine if Illinois law is
applicable to the contract.

When you add in the provision "without regard to State X choice of law
principles," the Court can skip applying the Restatement (Second or First,
or whatever Conflicts Law they utilize) provisions to see if State X law
governs the contract, and just apply State X law directly to the contract.

However, you probably need to work with Counsel to determine if they wish
to have their state's contract law apply.  Some states have contract law
that may be outside the mainstream, e.g., Louisiana, or underdeveloped
state law in some area, e.g., Wyoming, and therefore their counsel would
prefer to use another state's law.  Although, probably most institutions
would prefer to have their state's law apply.

Besides dealing with choice of law issues, venue should be brought in a
convenient forum, so that if a dispute arose, travel costs would not have
be incurred traveling to another state to litigate.  Basically, any Court
can apply any state's law, so the choice of law provision does not
guarantee that the case will be litigated in a convenient forum for your

If the parties to an action are from different states or have diversity of
citizenship, and the amount at issue is worth $75,000 or more, you can
bring suit in federal court, which can decide the case because it is
sitting in diversity.  The federal district court should apply the
substantive law of the choice of law stipulated in the contract, and
federal procedural rules.

For instance, I would try to put in the contract that if any case or
controversy arose regarding the contract, all actions or proceedings, with
regard to the construction, performance, and/or enforcement of the contract
would be brought in Federal District Court for the Northern District of
Illinois, provided jurisdiction could be obtained.

You can also write in a provision for state court, but if a contract is
worth less than $75,000, it's usually not worth litigating for a big
pharmaceutical company or a large institution.

Hope this is helpful.

Deborah Everds, J.D.

Deborah Everds
Research Administrator

 Instructions on how to use the RESADM-L Mailing List, including
 subscription information and a web-searchable archive, are available
 via our web site at (click on "Listserv Lists")