Choice of Law

What Is a Choice of Law Clause?

A choice of law clause (sometimes called a governing law clause) specifies which state's or country's substantive law will apply when interpreting a contract or resolving disputes about it. The clause is critical in agreements involving parties in different jurisdictions, online transactions, and international contracts because contract law varies significantly across legal systems.

Enforceability Considerations

• **Reasonable relationship**: the chosen jurisdiction must have a substantial connection to the parties or transaction - **Public policy exception**: the chosen law cannot violate a fundamental public policy of the forum state - **Mandatory law**: certain forum protections (consumer protection, employee rights) may apply regardless of the chosen law - **Article 187 of the Restatement (Second) of Conflict of Laws** is followed by most U.S. courts when assessing enforceability

Practical Drafting Points

Choice of law clauses are typically paired with forum selection clauses, which designate where disputes will be heard. The two clauses can specify different jurisdictions — for example, New York law applied in Delaware courts — though same-state alignment is more common. The clause should specify that the chosen law applies "without regard to its conflicts of laws principles" to avoid the chosen jurisdiction's rules pointing back to another body of law. International contracts may also reference the United Nations Convention on Contracts for the International Sale of Goods (CISG) and explicitly opt in or out. Delaware law is commonly chosen for U.S. business entity matters; New York law is often chosen for sophisticated commercial agreements because of its developed body of contract law.