Class 11 - Monday 2/17/2014
1. Party Autonomy and the Rule of Validation (108-120)
a. Two ideas:
i. Choice-of-law clauses in contracts
ii. Choice of law that validates contracts
1. Could be used even when no choice of law provisions exist
2. Could be used to choose law other than the law in the choice of law clause
b. We will consider choice-of law clauses in light of Restatement 2d
c. Start with § 188
i. Law Governing In Absence Of Effective Choice By The Parties
1. (1) The rights and duties of the parties with respect to an issue in contract are
determined by the local law of the state which, with respect to that issue, has the
most significant relationship to the transaction and the parties under the principles
stated in § 6.
d. All states recognize choice of law provisions in Ks.
i. On an exam, if there is a choice of law provision and you are in a 1st Restatement state?
1. The 1st restatement says nothing, so you must use Restatement 2d.
2. Very important to know what forum you are in so you can determine your choice
of law rules.
3. Va – follows 1st Restatement
4. Cali – interests analysis
5. NY – different approach (Neumeier rules)
6. Illinois – 2nd restatement.
ii. Must first know the normal choice of law rules – how to choose law in the absence of a
provision. Most significant relationship.
e. If there is a choice of law provision, Restatement 2d § 187.
i. Law Of The State Chosen By The Parties
1. (1) The law of the state chosen by the parties to govern their contractual rights
and duties will be applied if the particular issue is one which the parties could
have resolved by an explicit provision in their agreement directed to that issue.
ii. If what you are doing when choosing a law is choosing a rule that could have just been
inserted in the K then it will be enforced.
iii. Then the choice of law provision isn’t choice of law, it’s a timesaving device by putting
all the default rules into your K.
f. Default v. mandatory rule.
i. Whether the parties could have determined a particular issue by explicit agreement
directed to that issue is a question to be determined by the local law of the state selected
by application of the rule of § 188. Usually, however, this will be a question that would
be decided the same way by the relevant local law rules of all the potentially interested
states. On such occasions, there is no need for the forum to determine the state of the
applicable law.
1. How do you know whether its default or madnatory?
a. You look to the law that would be applied in the absence of a choice of
law provision.
2. IF it’s a default rule under that states law, no big deal.
3. But if it’s a mandatory rule, then it would appear impossible to K around.
g. Hypo - a NY court is considering a contract entered into in NY between a 17 year old NYer and
another NYer. Under NY law the contract is voidable by the 17 year old. Will the court enforce
a provision stating that the contract is not voidable by any party? Will the court enforce a
provision stating that PA law (which has no protection for 17 year olds) applies?
1. You can’t say the K is binding. Whole point of mandatory rule is you cannot K
around.
2. So how can you K around with choice of law provision?
3. But you CAN! - There are circumstances where there is a choice of law problem,
several states’ laws could be applied and even if it’s a court in a state with a
mandatory rule – they may decided to relax the rule.
4. Benefit of enforcement – gives certainty to the transaction.
h. Seigelman v. Cunard White Star Line (2d Cir. 1955)
i. Suing for himself and as administrator of wife’s estate from accident. 1 year S/L in K.
Provision said you cannot waive conditions on the ticket. English choice of law clause.
∆’s agent offered settlement and told π not to sue. S/L expired and offer was withdrawn.
ii. Question as to whether ∆ is estopped from asserting S/L? Has the K been rescinded
orally?
iii. Issue as to whether it’s a mandatory or default rule?
iv. Court says rightly its mandatory and English choice of law applies (and thus K is
binding).
i. Restatement 2d 187(3): In the absence of a contrary indication of intention, the reference is to the
local law of the state of the chosen law.
i. Getting around Jerome Frank and his legal realist tricks to get to a fair result.
ii. One of these tricks is the choice of law provision chose the whole law of England and not
the internal law.
iii. But 187 says presumption is the internal law and not whole law.
j. Restatement 2d 187(2)
i. 187(2) The law of the state chosen by the parties to govern their contractual rights and
duties will be applied, even if the particular issue is one which the parties could not have
resolved by an explicit provision in their agreement directed to that issue, unless either
1. (a) the chosen state has no substantial relationship to the parties or the transaction
and there is no other reasonable basis for the parties' choice, or
2. (b) application of the law of the chosen state would be contrary to a fundamental
policy of a state which has a materially greater interest than the chosen state in the
determination of the particular issue and which, under the rule of § 188, would be
the state of the applicable law in the absence of an effective choice of law by the
parties.
ii. Liberal enforcement approach of 2d Restatement.
iii. Not a default rule, talking about mandatory rule UNLESS....(a and b are reasons to
invalidated the choice of law provision)
iv. (a) idea for this is that law that is chosen has a substantial relationship (in Sieglman ∆ is
an English Company so there was a relationship). A reasonable basis is to make results
more certain. Only 2 jurisdictions that this is applicable is NY and England.
1. Ex. you are 2 montanans with a K in Montana to be performed in Montana – can
you really say choice of law England?
2. Could be this choice of law thing only works when there is a choice of law
problem.
3. It is not clear that the reasonable basis is constitutionally permissible. Should be
worried about that.
v. (b) OR contrary to fundamental policy.
1. This solves the problem of when 2 Montanans enter into a K in Montana with
performance in Mon and they choose English law. If Montana has a fundamental
policy, they can’t get around this.
2. The state whose law would normally apply may be willing to enforce a choice of
law provision unless it undermines fundamental policy.
3. Hypo: Mass Insurer contracts with NH insured. K says law of Mass applies. K
entered into in NH. Insured misstates the distance of house from fire hydrant,
house burns down. Under law of Mass, no rights under K because of
misstatement. Under law of NH, still has rights. Assume that most significant
relationship is with NH law
a. NH law would apply in the absence of the provision.
b. Under (b) NH has a materially greater interest.
c. Despite the choice of law provision, NH should apply because to do
otherwise would be contrary to a fundamental policy.
vi. With this in mind, how would we do the Seigleman case again?
1. Under the interest analysis, NY law would apply – materially greater interest.
2. But Prof. Green’s guess is the choice of law provision would have been upheld
because it would not be contrary to a fundamental policy.
3. What’s relevant is whether it is protective of a particular party and the English
rule wasn’t – it could have disadvantaged the steamship co too
k. 187 is the 2d Restatement’s approach to choice of law provisions in K.
i. That suggests it’s a procedural rule, and if you’re in a 2d jurisdiction, that’s the rule you
will be using.
ii. Imagine the state whose law would apply in the absence of a choice of law provision does
not recognized choice of law provisions at all. Imagine also the forum of the suit has no
connection. Isn’t it problematic that the forum upholds the provision when the state
whose law would apply doesn’t enforce choice of laws? Sort of a renvoi issue...
1. Never been mentioned.
2. Interest Analysis (135-50)
a. Generally
i. Methodology always used when worried about scope of the jurisdiction’s law.
ii. The same way Currie views it – problems with territorial scope. To whom do they apply?
iii. Hypo: P (NY) is suing D (NY) concerning a car accident in New York, under a law
providing for treble damages for accidents on highways. - D, appeals to a law limiting
recovery to $10,000 when against police officers who were acting in the course of his
duty
1. All NY, completely domestic, no choice of law problem in a jurisdictional sense,
but a choice of law problem in a domestic sense.
2. Conflict of NY laws.
3. One way is to determine priority – sometimes laws trump other laws.
4. But step 1 is to ensure that both laws apply and there is no false conflict.
a. So was this actually on a highway?
b. Was the ∆ actually in the scope of his duty?
5. The police provision trumps because the police provision is specific. Generally
the more specific trumps the general.
iv. Hypo: One statute says vehicles are not allowed in the park. Another statute says
children must be in strollers
1. Is a stroller a vehicle?
2. May look to purposes of statute.
3. Decide whether the purposes are vindicated when applied to the statute
supposedly in conflict.
4. If its not, then both are applicable and there is no conflict.
5. Consider guest statute conflicts (NY and Ontario example) – see if they apply to
interjurisdictional facts. Don’t rely on a rule of priority if you don’t have to do so.
Normal method of statutory construction (can be applied to common law).
Purposivist approach.
b. False Conflicts
i. Hypo: P (NY) sues D (NY) concerning a car accident in NY. NY has law saying anyone
who is grossly negligent shall be liable for harm. NJ has law saying anyone who is
negligent shall be liable for harm
1. NJ applies – all statutes are written in a language that has no choice of law or
territorial restriction.
2. It just seems right to use a purposivist approach rather than looking to the plain
language.
3. If you just looked to plain language, you’d get true conflicts all the time.
4. It seems reasonable to follow a purpose driven approach because that’s what
legislators would expect.
ii. Brainerd Currie
1. Idea is the purposivist approach can answer territorial issue.
2. Then use rule of priority if ther4e is a true conflict
3. For Currie that means apply forum law – no other conscionable way to answer the
question when there is a conflict.
4. The problem with this is if you have a disinterested forum – and then Currie
would recommend the court choose the better law
5. On Milliken v. Pratt (facts on slide)
a. Facts: Mass D contracted with Maine Ps to guarantee D’s husband’s
payment. Sent by her husband by mail from Mass to Maine. D’s husband
did not pay. Ps demanded of D. She refused. Mass had law not allowing
married women to contract as surety. Maine didn’t.
b. This was a true conflict.
c. False Conflicts
i. Schmilliken v. Schmratt
1. Facts: Maine D contracted with Mass Ps to guarantee D’s husband’s payment
Sent by her husband by mail from Maine to Mass. D’s husband did not pay. Ps
demanded of D. She refused. Mass had law not allowing married women to
contract as surety. Maine didn’t.
2. First Restatement would choose the law of the disinterested state.
3. Just switching states, not their laws.
4. Mass is the one with the law that bans the K, and Maine does not.
5. Under 1st Restatement, Mass law would be applied even though they are
disinterested.
6. Neither state’s interests are vindicated. False conflict, so 1st Restatement can
choose the law that doesn’t apply if the triggering event was in the state, or harm
occurred in the state.
ii. Babcock v. Johnson
1. Facts : NY P – guest in car w/ NY D. Crashed into stone wall in Ontario. Does
Ontario’s guest statute apply?
2. NY is the law - has an interest.
3. Ontario is interested in tort law applying and deterrence of accidents but will give
up on that because there is no concern about fraud harming Ontario.
4. Both laws want liability.
5. First Restatement would apply the guest statute (law of place of the harm).
6. Here, the concern was about fraud.
iii. Dym v. Gordon (NY 1965)
1. Facts: P and D both NY domiciliaries BUT taking courses at U of Colo. Collision
with another vehicle (from Kansas) in Colo. Does Colo guest statute apply?
2. There is some connection with choice of law., there is a 3d party involved, so
Colorado law applies.
3. If you want your statute to be read the same way it is read in another jurisdiction,
don’t bring it up. If you want it read differently, point out that it doesn’t have to
be read that way because it was created differently with different purposes.
4. In some sense this is a moral judgment about the guest/host relationship.
5. Idea that there is something inappropriate about the guest suing the host,
especially if a 3d party may take money away.
6. Here the parties have a guest/host relationship – in Colorado, established the
relationship there.
7. It’s the subtle differences (compare this case to Babcock). Not just the domicile.
8. Here there is a concern for the priority of 3d parties.
9. Also parties were living in Colo.
3. Identifying False Conflicts (150-69)
a. Tooker v. Lopez (NY 1969)
i. Facts: Two parties, both from NY, but were students in Michigan. Both were killed in a
car accident. Administrators of estate sued the other estate. Michigan statute prohibited
recovery except in cases of willful misconduct or gross negligence. Suit brought in NY.
1. Suit was brought in NY because of strategy in choice of law – NY is an interests
analysis state (chance NY may apply NY law). Thought that NY would be more
likely to apply NY law whatever the choice of law approach.
ii. Analysis:
1. Distinguished Dym because the guest statute was interpreted incoherently –
purpose of the statute shouldn’t give priority to 3d parties over guests.
a. If you can show recklessness you can recover (even before the 3d party).
b. No ordering of recovery.
c. Could still argue it’s a moral judgment about the guest/host relationship –
if you are reckless you are not treating a guest properly.
d. But NY ct says it is concern about fraud.
2. If you say that it’s about fraud – at what point do you say the fraud is felt in NY?
a. Is domicile really the most relevant?
b. If the parties are in cahoots and are staging the accident, must think about
where the consequences of the fraud will be felt.
c. Would have to start talking about insurance rates. Maybe it would raise
Michigan rates because the accident was there.
3. Court comes to the conclusion that NY law applies.
4. There is also another π here – she’s from Michigan. There is a worry that one
would be allowed to sue and the others would be barred.
a. Not crazy to argue that this is ok – you would just say there is an
applicable law that is being followed. Susan Silk has a law only applicable
to her.