What Is Choice of Law?

What Is Choice of Law?

Understanding How Courts Determine Which Jurisdiction’s Law Governs a Legal Dispute

When a legal dispute has connections to more than one jurisdiction, one of the most important questions a court may have to answer is:

Which jurisdiction’s law should govern the dispute?

This is the question at the heart of choice of law.

Choice of law is a central component of conflict of laws. It addresses situations in which two or more jurisdictions have a legitimate connection to a legal dispute and their laws may produce different results.

The problem is particularly important in the United States because each state has its own legal system. A dispute may involve people, businesses, transactions, property, or conduct connected to several states. The same problem can arise internationally when a private legal relationship crosses national borders.

For example, imagine that a New York resident is injured in an automobile accident in New Jersey by a driver who lives in Pennsylvania. The injured person files a lawsuit in New York.

New York, New Jersey, and Pennsylvania all have connections to the dispute. If their laws differ concerning liability or damages, the court must determine which state’s law should govern the particular issue.

That determination is a choice-of-law question.

Cornell’s Legal Information Institute explains that conflict-of-laws problems arise when the laws of two or more jurisdictions may apply to a case and the outcome depends upon which jurisdiction’s law is applied. Cornell Wex — Conflict of Laws

Choice of law therefore provides the bridge between a multi-jurisdictional dispute and the substantive law that ultimately determines the parties’ rights and obligations.

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What Does “Choice of Law” Mean?

The phrase choice of law does not necessarily mean that the parties themselves are choosing the law.

It usually refers to the legal process through which a court determines which jurisdiction’s law applies to a particular legal issue.

The court may be choosing between:

• the law of one U.S. state and another;
• federal and state law in certain circumstances;
• the law of the forum and the law of another jurisdiction;
• the law of the United States and foreign law; or
• the laws of two or more foreign countries.

The central question is not simply:

Where did the lawsuit begin?

Nor is it necessarily:

Where did the relevant event occur?

Instead, the court must determine which jurisdiction’s law has the legally appropriate connection to the issue being decided under the applicable conflict-of-laws methodology.

This is why choice of law is not synonymous with jurisdiction.

A court may have jurisdiction to hear a case while applying the law of another jurisdiction.

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Choice of Law Is an Issue-by-Issue Analysis

One of the most important principles to understand is that a court does not necessarily select one jurisdiction’s law for an entire lawsuit.

Choice of law can be conducted issue by issue.

Suppose a lawsuit involves:

• a contract between companies in different states;
• property located in a third state;
• an injury occurring in a fourth state; and
• litigation taking place in a fifth jurisdiction.

Different legal questions may have different governing laws.

The law governing ownership of real property may differ from the law governing a contractual obligation.

The law governing liability for a tort may differ from the law governing the enforceability of a contractual provision.

The law governing damages may potentially differ from the law governing whether liability exists.

Therefore, the question is often not:

Which state’s law governs the case?

but rather:

Which state’s law governs this particular legal issue?

This distinction is fundamental to modern conflict-of-laws analysis.

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Why Choice of Law Is Necessary

Choice-of-law problems arise because jurisdictions are legally capable of adopting different rules.

States may differ concerning:

• contract formation;
• contractual interpretation;
• negligence;
• comparative fault;
• damages;
• statutes of limitation;
• property rights;
• family relationships;
• employment relationships;
• insurance;
• corporations; and
• other areas of substantive law.

These differences may reflect legitimate policy choices.

One state may place greater emphasis on protecting consumers.

Another may emphasize freedom of contract.

One jurisdiction may impose broader liability for particular conduct.

Another may limit liability.

Choice of law determines which jurisdiction’s policy and legal rules control the particular dispute.

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Choice of Law and the Forum

The forum is the jurisdiction in which the case is being heard.

The forum matters because the forum’s legal system ordinarily provides the framework for deciding how the choice-of-law question itself should be resolved.

This creates an important distinction:

The forum’s law may determine how the court chooses the applicable law, while another jurisdiction’s substantive law may ultimately govern the underlying dispute.

For example, a court in New York may determine under its conflict-of-laws methodology that California substantive law governs a particular issue.

The court is therefore sitting in New York while applying California law to the relevant question.

This is not unusual.

It is one of the defining characteristics of conflict-of-laws litigation.

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Choice of Law Is Different From Choice of Forum

The terms choice of law and choice of forum are closely related but describe different decisions.

Choice of law

asks:

Which jurisdiction’s law governs the dispute or particular issue?

Choice of forum

asks:

Which court or jurisdiction will hear the dispute?

A contract may provide that disputes must be litigated in a particular court while separately specifying which law governs.

For example, a contract might require litigation in a New York court but state that California law governs the agreement.

The parties have therefore made two different choices:

• forum: New York;
• governing law: California.

Whether a court will enforce both provisions depends upon the applicable law and circumstances.

The distinction is essential because litigating in a particular jurisdiction does not automatically mean that the law of that jurisdiction will govern every substantive issue.

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Party Autonomy and Choice of Law

Choice of law can arise in two fundamentally different ways.

Sometimes the parties themselves have selected the governing law.

This is particularly common in contracts.

A contract may contain a provision stating that it is governed by the law of a particular state or country.

This is often called a choice-of-law clause, governing-law clause, or applicable-law clause.

Party autonomy is an important principle in contractual relationships because businesses and individuals often want to know in advance which legal system will govern their agreement.

A carefully drafted governing-law provision can reduce uncertainty and litigation over applicable law.

However, contractual choice of law is not necessarily unlimited.

Courts may examine whether the chosen jurisdiction has an appropriate connection to the transaction, whether the provision is valid, whether mandatory law applies, and whether applying the chosen law would violate an important public policy.

Consequently, the existence of a choice-of-law clause does not always end the analysis.

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When the Parties Have Not Chosen the Law

Many disputes arise without a contractual choice-of-law provision.

This is common in:

• automobile accidents;
• personal injury cases;
• family disputes;
• property disputes;
• employment relationships;
• tort claims; and
• contracts that contain no governing-law clause.

In such circumstances, the court must apply the relevant choice-of-law methodology.

The court examines the jurisdictions connected to the dispute and determines which jurisdiction’s law should govern the particular issue.

This is where the more technical choice-of-law rules become important.

The next article in this series can examine those rules in detail.

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Traditional Territorial Approaches

Historically, choice of law was often based heavily upon territorial principles.

Courts attempted to identify the geographical location with which the legal relationship was most closely connected.

Several traditional principles developed from this approach.

For example:

• the law of the place where a tort occurred;
• the law of the place where a contract was made;
• the law of the place where property is located; or
• the law of the forum.

These principles were attractive because they offered relatively predictable answers.

If an accident occurred in State A, a court could simply apply State A’s law.

If real property was located in State B, State B’s law could govern property rights.

But modern legal relationships often make territorial analysis considerably more complicated.

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The Movement Toward Modern Choice-of-Law Approaches

During the twentieth century, American courts increasingly moved away from rigid territorial formulas.

Legal scholars and courts recognized that the place where an event occurred was not always the jurisdiction with the strongest interest in the legal issue.

Consider a hypothetical accident involving:

• a driver from State A;
• a passenger from State B;
• a vehicle manufactured in State C;
• an accident occurring in State D; and
• litigation filed in State E.

Which state should automatically control?

The geographical location of the accident is certainly important.

But other jurisdictions may have significant interests as well.

The driver’s home state may have an interest in regulating the conduct of its residents.

The passenger’s home state may have an interest in protecting its resident.

The state where the manufacturer is located may have regulatory interests concerning products.

The forum may have procedural or policy interests.

Modern choice-of-law analysis therefore frequently considers relationships, interests, policies, expectations, and other connecting factors, rather than relying exclusively upon geography.

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Governmental Interests and Choice of Law

One modern approach considers the interests of the jurisdictions involved.

Under an interest-analysis model, a court may ask what governmental policy lies behind each competing law.

For example, suppose State A has a rule designed primarily to protect its residents from a particular form of liability.

State B has a different rule designed to protect businesses operating within its territory.

If a dispute involves a resident of State A and a business operating in State B, the court may examine which state’s policy is genuinely implicated by the particular issue.

This approach recognizes that laws exist for purposes.

The question is therefore not merely:

Where did the event happen?

It may instead be:

Which jurisdiction has the stronger interest in having its policy applied to this particular dispute?

This represents a major development in American conflict-of-laws doctrine.

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The Most Significant Relationship

Another modern approach focuses upon the jurisdiction having the most significant relationship to the parties and the particular issue.

The court may consider several factors, such as:

• where the injury occurred;
• where the conduct occurred;
• where the parties reside;
• where the parties’ relationship is centered;
• where a contract was negotiated;
• where it was performed;
• where relevant property is located; and
• the policies and interests of the jurisdictions involved.

The importance of each factor depends upon the type of dispute.

For example, the location of property may be exceptionally important in a real-property dispute but less important in a dispute over an online service contract.

Similarly, the place where an accident occurred may be highly significant in one tort dispute but less decisive in another.

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Choice of Law and Party Expectations

The reasonable expectations of the parties can also influence choice-of-law analysis.

This is particularly important in contractual relationships.

If two sophisticated businesses deliberately structure their agreement under the law of a particular jurisdiction, a court may give substantial weight to that choice.

The underlying idea is that legal predictability has value.

Parties who enter into a commercial relationship should, within appropriate legal limits, be able to understand the legal environment governing their agreement.

However, expectations cannot necessarily override mandatory rules or fundamental public policies.

Choice of law therefore involves a balance between predictability and legitimate governmental interests.

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Public Policy and Choice of Law

A jurisdiction may have an important public policy that conflicts with the law of another jurisdiction.

This can create one of the most difficult problems in choice-of-law analysis.

Imagine that State A permits a particular contractual provision while State B considers the same provision contrary to an important public policy.

If a dispute arises in State B, the court may have to determine whether State A’s law should nevertheless be applied.

The answer depends upon the applicable conflict-of-laws framework.

Courts do not ordinarily disregard foreign law simply because it differs from the forum’s law.

Respect for other jurisdictions is itself an important feature of conflict-of-laws doctrine.

But the forum may, under certain circumstances, refuse to apply foreign law when doing so would seriously undermine an important local policy.

This is sometimes associated with the public-policy exception.

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Choice of Law in Contracts

Contracts provide some of the clearest examples of choice-of-law principles.

A commercial agreement can have numerous geographical connections.

For example:

• one party may be incorporated in Delaware;
• another may be headquartered in California;
• negotiations may take place in Illinois;
• the agreement may be signed electronically;
• performance may occur in Texas; and
• payment may be processed through a financial institution in New York.

Without a governing-law clause, the court may need to determine which jurisdiction’s law applies.

With a governing-law clause, the analysis may be substantially simplified.

The parties may have agreed in advance that the contract is governed by the law of a specified state.

Nevertheless, the enforceability and scope of that agreement may still require legal analysis.

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Choice of Law in Torts

Tort disputes frequently create difficult choice-of-law questions because the relevant events may occur in several jurisdictions.

A motor vehicle accident is a classic example.

Suppose:

• the plaintiff lives in Pennsylvania;
• the defendant lives in New York;
• the accident occurs in New Jersey; and
• the vehicle is registered in New York.

If New York, New Jersey, and Pennsylvania have different rules concerning liability or damages, which law should apply?

A court must apply the conflict-of-laws methodology relevant to the forum and the particular issue.

The answer may depend upon the jurisdictions’ relationships and interests rather than merely the location of the accident.

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Choice of Law in Family Law

Family-law disputes can also cross jurisdictional boundaries.

A couple may:

• marry in one state;
• live in another;
• acquire property in several states;
• have children who reside in a different jurisdiction; and
• initiate divorce proceedings after moving again.

Questions concerning marital property, custody, support, recognition of a marriage, and other family-law matters can therefore raise multi-jurisdictional issues.

Family law also illustrates an important limitation of generalization: specialized statutes and federal constitutional principles can significantly affect how particular choice-of-law questions are resolved.

There is no single universal formula applicable to every family-law dispute.

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Choice of Law and Property

Property disputes can involve particularly strong territorial connections.

Real property is physically located somewhere, and the jurisdiction where the property is situated traditionally has a powerful interest in regulating rights associated with it.

This principle is commonly expressed through the concept of lex rei sitae—the law of the place where the property is located.

For real property, the location of the property can therefore be an exceptionally important connecting factor.

Personal property can present different questions, particularly when it moves between jurisdictions or is involved in interstate commercial transactions.

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Choice of Law in Federal Courts

Federal courts can encounter choice-of-law questions in several contexts.

One of the most important arises when a federal court hears state-law claims through diversity jurisdiction.

The federal court may be required to determine which state’s substantive law applies.

This does not mean that the federal court simply applies the law of the state in which the courthouse is located.

Instead, federal courts may be required to apply the relevant state’s conflict-of-laws rules when determining the applicable state substantive law.

The result can be especially important in cases where different states would reach different substantive outcomes.

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Choice of Law and Foreign Law

Choice-of-law analysis is not limited to U.S. states.

A U.S. court may determine that the law of another country governs a particular issue.

For example, an international contract may contain a provision selecting English law.

If the provision is enforceable and applicable, a U.S. court may be required to determine and apply the relevant principles of English law to the issue.

This does not transform English domestic law into international law.

Rather, the U.S. court is applying foreign domestic law because its conflict-of-laws analysis identifies that law as governing.

This distinction is particularly important in international commercial disputes.

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The Problem of Characterization

Before a court can determine which choice-of-law principle applies, it may have to decide what kind of legal issue it is dealing with.

This process is sometimes called characterization.

A court may need to determine whether an issue concerns:

• contract;
• tort;
• property;
• family law;
• procedure;
• evidence;
• or another legal category.

The classification matters because different legal categories can have different conflict-of-laws rules.

For example, a statute of limitations may be treated differently from a substantive rule of liability.

A rule concerning evidence may be treated differently from a rule establishing a legal right.

Therefore, choice-of-law analysis can begin before the court actually chooses between competing laws.

The court must first identify the legal issue that requires a choice.

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The Problem of Renvoi

In some international conflict-of-laws systems, a court may encounter a doctrine known as renvoi.

Renvoi concerns whether a reference to the law of another jurisdiction means only that jurisdiction’s substantive law or whether it also includes that jurisdiction’s own conflict-of-laws rules.

For example, suppose a court determines that the law of Country A governs a particular issue.

Country A’s conflict-of-laws rules might point back to the law of the forum or onward to the law of Country B.

This creates a circular or potentially multi-step choice-of-law problem.

American jurisdictions do not uniformly apply renvoi, and its treatment varies according to the subject and jurisdiction.

It is therefore best understood as a specialized doctrine within the broader field rather than a universal principle of choice of law.

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Choice of Law Does Not Mean That the Court Is Free to Choose Whatever Law It Prefers

The word “choice” can be misleading.

A judge does not ordinarily have unrestricted discretion to select whichever law produces the most desirable result.

Choice of law is a legal analysis governed by rules and principles.

The court must identify the relevant conflict-of-laws framework and apply it to the facts.

That framework may involve:

• statutes;
• judicial precedent;
• territorial principles;
• governmental interests;
• significant relationships;
• party expectations;
• contractual choices;
• public policy;
• constitutional limitations; and
• other legally recognized connecting factors.

The purpose is not personal preference.

The purpose is to determine which jurisdiction’s law has the strongest legal claim to govern the particular issue.

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Choice of Law and Predictability

One of the major goals of choice-of-law doctrine is predictability.

People and businesses benefit from knowing what law will govern their conduct.

This is especially important in commercial transactions.

A business deciding whether to enter a contract with an out-of-state company may want to know:

• what obligations will arise;
• what remedies will be available;
• what limitations will apply; and
• what law will govern a future dispute.

Clear choice-of-law rules can reduce uncertainty.

At the same time, excessive rigidity can produce unfair or arbitrary results when the selected jurisdiction has little meaningful relationship to the dispute.

Modern conflict-of-laws doctrine therefore attempts to balance certainty with fairness and legitimate governmental interests.

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Choice of Law and the Avoidance of Forum Shopping

Choice-of-law doctrine can also affect forum shopping.

Forum shopping occurs when a party seeks to litigate in a particular jurisdiction because that forum may offer a strategically favorable legal environment.

If the substantive law automatically changed simply because a party successfully moved litigation to another forum, parties could have strong incentives to search for favorable courts.

Conflict-of-laws rules can limit this problem by requiring courts to apply established principles when determining the governing law.

The interaction between forum selection, jurisdiction, and choice of law is therefore an important part of strategic litigation.

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Choice of Law Is Not Always About Choosing Between Two Completely Opposite Laws

Sometimes the laws of the jurisdictions involved are substantially similar.

In such cases, the choice may have little practical significance.

At other times, however, the difference can be decisive.

The laws may differ concerning:

• the existence of a cause of action;
• defenses;
• burdens of proof;
• damages;
• enforceability of contractual provisions;
• limitation periods;
• liability standards; or
• available remedies.

A court therefore must determine whether a genuine conflict exists.

If two jurisdictions have materially identical rules concerning the issue, there may be little reason to conduct an extensive choice-of-law analysis.

This is sometimes described as a false conflict or a situation in which the laws do not actually conflict on the relevant issue.

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The Relationship Between Choice of Law and Conflict of Laws

Choice of law should be understood as one of the principal components of conflict of laws.

Conflict of laws is the broader field.

It may encompass questions involving:

• jurisdiction;
• choice of law;
• recognition of foreign judgments;
• enforcement of judgments;
• characterization;
• public policy;
• foreign law;
• and other multi-jurisdictional issues.

Choice of law focuses specifically on the question:

Which jurisdiction’s substantive law governs?

This distinction will become increasingly important as the Conflict of Laws section develops.

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Choice of Law in Practice

A lawyer confronting a multi-jurisdictional dispute might approach the problem in several stages.

First, identify the legal issue.

Is the question about liability, contract formation, damages, property ownership, procedure, or something else?

Second, identify the potentially relevant jurisdictions.

Which states or countries have meaningful connections to the issue?

Third, determine the applicable conflict-of-laws methodology.

The forum’s law may determine the framework that the court must use.

Fourth, determine whether the parties selected the governing law.

If a valid choice-of-law clause exists, it may significantly influence the analysis.

Fifth, examine the relevant connecting factors.

These may include residence, domicile, place of conduct, place of injury, place of contracting, place of performance, property location, or other legally significant relationships.

Sixth, consider governmental interests and public policy.

Which jurisdictions have legitimate interests in applying their laws to the issue?

Finally, determine the governing law.

The court then applies the law identified through the appropriate legal framework.

This is the practical meaning of choice-of-law analysis.

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Key Takeaways

• Choice of law determines which jurisdiction’s law governs a particular legal issue in a multi-jurisdictional dispute.
• It is a central component of conflict of laws.
• Choice of law is different from jurisdiction: jurisdiction concerns the court’s authority, while choice of law concerns the applicable legal rules.
• The forum is the jurisdiction in which the case is being heard.
• A court may apply another jurisdiction’s law even though the case is being litigated in the forum.
• Choice of law is often conducted issue by issue, rather than selecting one jurisdiction’s law for the entire lawsuit.
• Parties can sometimes select governing law through a choice-of-law clause.
• Courts may nevertheless impose limitations on contractual choices of law.
• Traditional choice-of-law approaches relied heavily on territorial principles.
• Modern approaches may consider governmental interests, significant relationships, party expectations, and other connecting factors.
• Public policy can affect whether the law of another jurisdiction will be applied.
• Choice-of-law analysis can arise between U.S. states as well as between countries.
• Foreign domestic law is not the same thing as public international law.
• Characterization may be necessary before a court can determine which choice-of-law methodology applies.
• Renvoi is a specialized doctrine concerning references to another jurisdiction’s conflict-of-laws rules.
• The word “choice” does not mean that judges may freely select whichever law they prefer. The decision must be based on legally recognized rules and principles.
• Predictability, fairness, legitimate governmental interests, and respect for other jurisdictions are recurring concerns in choice-of-law doctrine.

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Frequently Asked Questions

What is choice of law in simple terms?

Choice of law is the legal process of determining which jurisdiction’s law should govern a particular issue when a dispute is connected to more than one jurisdiction.

Is choice of law the same as conflict of laws?

No. Conflict of laws is the broader field. Choice of law is one of its principal components.

Does the law of the forum automatically apply?

No. The forum may apply its own law to some issues, but its conflict-of-laws rules may require the court to apply another jurisdiction’s substantive law.

Can the parties choose the law that governs their contract?

Often they can. A contract may contain a choice-of-law or governing-law clause. However, the validity and scope of such a clause are subject to applicable legal limitations.

Is choice of law only relevant when different countries are involved?

No. It is extremely common in disputes involving different U.S. states.

Can different laws apply to different issues in the same case?

Yes. Choice of law can be conducted on an issue-by-issue basis. Different legal questions may therefore be governed by different jurisdictions’ laws.

What happens if two jurisdictions have the same rule?

If the laws do not materially differ on the relevant issue, the choice may have little practical significance. Courts may refer to this as a false conflict or a situation in which there is no actual conflict concerning that issue.

Can a U.S. court apply foreign law?

Yes. A U.S. court may apply foreign domestic law when the applicable choice-of-law analysis determines that foreign law governs the issue.

Can a judge simply choose whichever law seems fairest?

No. Choice of law is governed by legal rules and principles. A judge must apply the methodology required by the relevant jurisdiction rather than simply selecting a preferred outcome.

Why does choice of law matter?

Because different jurisdictions can have materially different rules concerning liability, contracts, property, damages, defenses, remedies, and other legal rights. The governing law can therefore determine the outcome of a dispute.

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Conclusion

Choice of law is one of the central mechanisms through which courts manage a world of overlapping jurisdictions.

Whenever a legal relationship extends beyond the boundaries of a single jurisdiction, the possibility arises that more than one body of law could govern the dispute. The court must then determine which jurisdiction’s law has the strongest legal claim to control the particular issue.

That determination is not necessarily based upon geography alone.

Modern choice-of-law analysis may take into account the parties’ relationships, the place of relevant conduct, the location of property, the center of the parties’ relationship, governmental interests, party expectations, contractual choices, and fundamental public policies.

The result may be that a court applies the law of the forum, the law of another U.S. state, or even the domestic law of a foreign country.

The important point is that choice of law is a structured legal inquiry, not an unrestricted judicial preference.

It provides the mechanism by which courts determine which substantive legal rules should govern when the boundaries of different legal systems intersect.

The next step is to examine the Choice-of-Law Rules and Principles themselves: the specific doctrines, connecting factors, territorial rules, interest-based approaches, significant-relationship tests, and other frameworks courts use to reach that determination.