Party Autonomy

ZHANG GALLEYS.
FINAL 3/29/2007 10:59:35 AM
PARTY AUTONOMY AND BEYOND: AN INTERNATIONAL

PERSPECTIVE OF CONTRACTUAL CHOICE OF LAW
Mo Zhang∗
INTRODUCTION
Party autonomy is a choice of law doctrine that permits parties to choose

the law of a particular country or sovereignty to govern their contract that
involves two or more jurisdictions.1 On its face, it seems evident that the
freedom of the parties ought to be recognized when determining applicable law
to which the parties are willing to be subject through either a choice of law
clause in the contract or the parties’ preference.2 But in fact, since it was
introduced in the sixteenth century,3 the doctrine has been the center of debate
among the conflict of laws scholars and applied variously in different
jurisdictions.4
There is a two-fold question that goes to the heart of party autonomy. On
the one hand, the question is whether the parties may choose the law that
would determine the legal consequences of their contractual activities. The
answer to this question not only impacts the freedom of the parties to choose
governing law,5 but also affects the applicable law by which the parties would
be bound. On the other hand, the question has to do with whether the law
chosen by the parties would be enforced in a certain jurisdiction. It is obvious
that the enforceability of a choice of law clause eventually decides the ultimate
fate of the parties’ autonomy with regard to the law applicable to the contract.
∗ Associate Professor of Law, Temple University Beasley School of Law and Director of Temple
University China Law Programs. The author thanks Professor Jacques DeLisle, University of Pennsylvania
School of Law, for his invaluable advice and guidance.
1 See WILLIS REESE & MAURICE ROSENBERG, CONFLICT OF LAWS, CASES AND MATERIALS 576–96 (8th
ed. 1984). See also DAVID MCCLEAN, MORRIS: THE CONFLICT OF LAWS 4–5 (5th ed. 2000).
2 See Ole Lando, Contracts, III-24, in INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LAW 3 (Kurt
Lipstein ed., 1971).

3 The concept of party autonomy was first found in the writings of the French jurist Charles Dumoulin.
See id. at 6; see also Ernest G. Lorenzen, Validity and Effects of Contracts in the Conflict of Laws, 30 YALE
L.J. 565, 572–75 (1921).
4 See Note, Conflict of Laws: “Party Autonomy” in Contracts, 57 COLUM. L. REV. 553, 553 (1957).
5 See Willis L. M. Reese, Conflict of Laws and the Restatement Second, 28 LAW & CONTEMP. PROBS.
679, 697 (1963).

ZHANG GALLEYS.FINAL 3/29/2007 10:59:35 AM
512 EMORY INTERNATIONAL LAW REVIEW [Vol. 20
In general, when confronted with a choice of law clause, a court may treat it in
different ways: the court may accept the clause and apply the law selected, set
aside the clause and make a judicial determination of law instead, or deem the
clause as an element in the consideration of applicable law.6
Given its emphasis on the intention of the parties to contract for the
applicable law, party autonomy is especially favored by many practitioners in
international business transactions. They believe that allowing the contractual
parties to determine the law that applies to the disposal of their rights and
obligations will help achieve efficiency, certainty, predictability, and
protection of the parties’ expectations—the conflict of laws values that have
particular importance in today’s global economy.7 Scholars, however, seem to
have difficulty in reaching a consensus on the substance of party autonomy.
They frequently question the theoretical underpinnings of the party autonomy
doctrine as well as the practicability of its application.8 In addition, the
analytical complexity employed in judicial practice makes the application of
the party autonomy doctrine far from uniform.
Choice of law could become an issue either in a case involving two
“sovereign” states inside a single country or in a case affecting two different
countries. In the former case, choice of law is designed to cope with interstate
conflicts, while in the latter case it involves the international conflicts.9
Perhaps for this reason, the conflict of laws in many countries is labeled as
private international law (or international private law), and its primary function
is to “regulate” civil disputes that have elements related to a foreign country.
In the United States, choice of law is basically a domestic concern, and it
usually deals with the question of what law should be applied to a multi-state
problem.10 Therefore, as a general pattern, choice of law issues in the United
6 Richard J. Bauerfeld, Effectiveness of Choice-of-Law Clauses in Contract Conflicts of Law: Party
Autonomy or Objective Determination?, 82 COLUM. L. REV. 1659, 1660 (1982).

7 Christopher L. Ingrim, Choice-of-Law Clauses: Their Effect on Extraterritorial Analysis—A Scholar’s
Dream, A Practitioner’s Nightmare, 28 CREIGHTON L. REV. 663, 664–65 (1995).

8 See generally Lando, supra note 2, at 13.
9 Perhaps due to the existence of differences between interstate conflicts and international conflicts, the
term “conflict of laws” is normally used in a country that has interstate conflicts while the term “private
international law” is generally employed in a country with no interstate conflicts. Generally, it depends on the
structure of a particular country, or in other words, it depends on whether the country has a federal system in
which each state is deemed as a sovereign vis-à-vis other states in the country, or the country has a unitary
system in which a state or province is a sub-unit of the government rather than a sovereign.
10 See Mathias Reimann, Parochialism in American Conflicts Law, 49 AM. J. COMP. L. 369, 388 (2001)
(arguing that “mainstream American conflicts law continues to focus too much on purely domestic issues and
2006] PARTY AUTONOMY AND BEYOND 513
States are examined and discussed in light of resolving interstate legal conflicts
and promoting interstate relations under the framework of a federal
constitution.11 Simply put, interstate conflicts are regarded as “a chief concern
of the Constitution.”12 Thus, although the choice of law rules developed in the
United States are said to be equally applicable to international cases with
certain exceptions,13 the focus of choice of law literature and practice is clearly
on interstate rather than international matters.14
It has been argued that “[i]nternational concerns often influence domestic
conflicts law in the United States, particularly in the area of contractual
conflicts.”15 But unfortunately, such influence seems to be limited in several
ways. First, international concerns rarely surmount the localism embedded in
the interest-oriented character of the modern U.S. conflict of laws.16 Second,
the constitutionality claim may either seriously discount the international
concerns or make such concerns irrelevant.17 Third, the individualism of the
state in the realm of choice of law may fence off the uniform application in the
United States of any choice of law rule commonly accepted internationally.18
to treat international problems as an exotic sideshow”); see also DAVID VERNON, LOUIS WEINBERG, WILLIAM
REYNOLDS & WILLIAM RICHMAN, CONFLICT OF LAWS: CASES, MATERIALS AND PROBLEMS 235 (2d ed. 2003).
11 It is generally held that in the United States, certain limitations imposed upon the choice of law by the
Constitution may only apply to interstate conflict. The most notable is the Full Faith and Credit Clause. See
generally Robert Leflar, Constitutional Limits on Free Choice of Law, 28 LAW & CONTEMP. PROBS. 706, 708
(1963).
12 Kermit Roosevelt III, The Myth of Choice of Law: Rethinking Conflicts, 97 MICH. L. REV. 2448, 2453
(1999).
13 DAVID CURRIE, HERMA KAY & LARRY KRAMER, CONFLICT OF LAWS, CASES—COMMENTS—
QUESTIONS vii-viii (6th ed. 2001).

14 Reimann, supra note 10, at 388.
15 Patrick J. Borchers, The Internationalization of Contractual Choice of Law, 28 VAND. J. TRANSNAT’L
L. 421, 422 (1995).

16 Some have pointed out that in the United States, “courts have to identify basic policies, interests and
considerations and work out some system for deliberately basing choice-of-law decisions upon intelligent
analysis of those policies, interests and considerations.” LUTHER MCDOUGAL III, ROBERT FELIX & RALPH
WHITTEN, AMERICAN CONFLICTS LAW 8 (5th ed. 2002).
17 In choice of law, the most popular constitutional clauses are the Due Process Clause and Full Faith and
Credit Clause. In Allstate Insurance Co. v. Hague, the United States Supreme Court stipulated: “for a State’s
substantive law to be selected in a constitutionally permissible manner, that State must have a significant
contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither
arbitrary nor fundamentally unfair.” 449 U.S. 302, 312–13 (1981). Therefore, if there is a clash between an
international concern about the need for global trade and a constitutional claim on the requirement of contacts,
it will be very difficult, if not impossible, for the former to prevail.
18 Conflict of laws in the United States is state law, and each state may adopt conflict of laws rules that
are different from any other state. A recent survey revealed that in the United States in 2004, among the 50
states plus the District of Columbia and Puerto Rico, 11 states applied the traditional choice of law approach to
contracts, 24 states followed the relationship-focused approach, and 17 adopted other approaches. See Symeon
A recent development in U.S. choice of law that may reflect the influence
of “international concerns” is the revisions to section 1-105 of the Uniform
Commercial Code (U.C.C.), which is now U.C.C. section 1-301. The main
thrust of the U.C.C. section 1-301 revision is the removal of the “reasonable
relation” requirement in U.C.C. section 1-305 in regard to the choice of law by
the parties.19 Under U.C.C. section 1-301 (c)(1) and (2), except for when one
of the parties to a transaction is a consumer, an agreement by parties to a
domestic or international transaction that any or all of their rights and
obligations are to be determined by the law of a certain state or country (a
choice of law clause) is effective, regardless of whether the transaction bears a
relation to the State or country designated.20
Obviously, U.C.C. section 1-301 tries to provide the parties with greater
autonomy to designate a jurisdiction whose law will govern than that
previously provided in U.C.C. section 1-105,21 though such greater autonomy
is limited to non-consumer transactions.22 The advocates of the revision
C. Symeonides, Choice of Law in the American Courts in 2004: Eighteenth Annual Survey, 52 AM. J. COMP.
L. 919, 944 (2004).
19 U.C.C. section 1-105 states that:
Except as provided hereafter in this section, when a transaction bears a reasonable relation to this
state and also to another state or nation the parties may agree that the law either of this state or of
such other state or nation shall govern their rights and duties.
U.C.C. § 1-105 (2003).
20 The relevant provisions of U.C.C. section 1-301 are as follows:
(c) Except as otherwise provided in this section:

(1) an agreement by parties to a domestic transaction that any or all of their rights and
obligations are to be determined by the law of this State or of another State is effective,
whether or not the transaction bears a relation to the State designated; and
(2) an agreement by parties to an international transaction that any or all of their rights and
obligations are to be determined by the law of this State or of another State or country is
effective, whether or not the transaction bears a relation to the State or country designated;
....
(e) If one of the parties to a transaction is a consumer, the following rules apply:
(1) An agreement referred to in subsection (c) is not effective unless the transaction bears a
reasonable relation to the State or country designated.
(2) Application of the law of the State or country determined pursuant to subsection (c) . . .
may not deprive the consumer of the protection of any rule of law governing a matter within
the scope of this section, which both is protective of consumers and may not be varied by
agreement.
Id. § 1-301.
21 See id.
22 In addition, if the contract is purely domestic, the parties may not choose a foreign law as the
governing law. Id.

believe that since commerce occurs in a “global village,”23 parties should be

allowed to “select the law of an unconnected state,” not just those states that
are related to their transaction.24 However, the liberal view of U.C.C.
section 1-301 on party autonomy has been opposed on two grounds by those in
favor of a narrower reading of the U.C.C. provision. This opposition is
motivated either by a position in favor of restrictive party autonomy25 or due to
a strong inclination towards the interest of the states involved.26 Further, some
critics have argued that there is good reason to worry that U.C.C. section 1-301
is in fact “unconstitutional.”27
What seems indisputable is that the principle of party autonomy is accepted
in the United States as pertaining to contractual choice of law. But acceptance
takes a unique form. Specifically, the acceptance of party autonomy in the
United States is intertwined so closely with the far-reaching interest and policy
analysis of its domestic nature that matters concerning party autonomy, to a
great extent, are viewed and dealt with in a parochial, rather than an
internationally-oriented, manner. Thus it is not difficult to understand why, in
U.S. conflict of laws theory, the idea of contractual choice of law has always
been something of a “stepchild.”28
This Article attempts to address party autonomy and its application from
the aspect of international conflicts. It discusses why party autonomy is both
popular and controversial in the area of conflict of laws; whether party
autonomy would indeed help achieve conflict of laws values—namely
efficiency, certainty, predictability, and the protection of the parties’
expectations;—and how the freedom of the parties and governmental interests
should be balanced in the choice of law.
It is a misconception that the acceptance of party autonomy is premised or
dependent on judicial analysis of the important legislative policies of interested
foreign jurisdictions. As a choice of law rule, party autonomy already
23 Borchers, supra note 15, at 442.

24 Id. at 438.
25 Professor Russell Weintraub strongly opposes allowing the contract’s validity to be determined by the
rule of party autonomy because he finds it “not convincing” to argue that “the party autonomy choice-of-law
rule on questions of contract validity . . . best accords with the need of the commercial community for certainty
and predictability in interstate and international transactions.” RUSSELL WEINTRAUB, COMMENTARY ON THE
CONFLICT OF LAWS 449 (4th ed. 2001).
27 See, e.g., Richard K. Greenstein, Is the Proposed U.C.C. Choice of Law Provision Unconstitutional?,
73 TEMP. L. REV. 1159, 1172 (2000).

embodies the interest of relevant states or countries, and therefore no

additional judicial analysis of such interest is needed for the enforceability of a
choice of law clause, particularly in the area of international conflicts.
Part I examines the fundamental concept of party autonomy and its
development. The coverage of party autonomy has been extended from the
validity of contract to the rights and obligations of the parties to the contract,
and from choice of law to choice of forum. Part II analyzes how party
autonomy is being applied in the United States and suggests that the party
autonomy rule has been “messed up” through the analysis of state interests and
policies, which in many cases has diminished the value of the party autonomy
doctrine. Part III discusses international application of party autonomy as a
general rule in contractual choice of law. With reference to the provisions of
international treaties and conventions, this Article emphasizes the pragmatic or
practical importance of choice of law clauses in international transactions and
the necessity of party autonomy.
Part IV presents an argument premised on the freedom of contract: party
autonomy deserves full respect and need not have a relation base. A choice of
law clause should not be rendered invalid unless application of the law so
chosen would result in a violation of public policy or mandatory rules of the
forum. A court is not in the position to evaluate the interest of another state or
country in the determination of the enforceability of the choice of law clause
because, at least in international settings, it may be inappropriate for a forum to
judge the legislative interest of a foreign country. The Article concludes that
an internationally-oriented and rule-based party autonomy approach will help
achieve conflict of laws values, and that U.C.C. section 1-301, though not
perfect, is indeed moving U.S. law in the right direction.
I. PARTY AUTONOMY: AN OLD CONCEPT WITH EVOLVING SUBSTANCES
As noted, party autonomy as a choice of law doctrine is not new. The

doctrine is said to originate from the writings of Charles Dumoulin (1500-
1566), a French scholar of the sixteenth century who was acclaimed as “the
father of party autonomy.”29 It was Dumoulin’s belief that with respect to
contracts, “the will of the parties is sovereign.”30 The will of the parties is,
therefore, the leading factor in the determination of the law governing
29 Lando, supra note 2, at 6.

30 See Lorenzen, supra note 3, at 573.
contracts.31 Thus, when the intention of the parties is the decisive factor, the
circumstances indicating such an intention should determine which law shall
prevail.32 Dumoulin further articulated that under party autonomy, in the
absence of express choice, the law was to be sought in accordance with the
tacit and probable intentions of the parties.33 Thus if the will of the parties was
not expressed, it must be “sought in the surrounding circumstances.”34
Historically, the party autonomy doctrine was introduced against the then-
prevailing approach of lex loci contractus, namely the law of the place of
contracting.35 Based on the notion of lex loci, the Italian statutist Bartolus a
Sassoferrato (1314-1357) subjected the contract to the law of place where the
contract was made.36 Bartolus believed that “the law of the place of
contracting governs all questions concerning the form and substance of the
contract.”37 According to Bartolus and his followers, a contract, like a person,
was subject to the law of the place of its origin, and the origin as such was the
place where the contract was born.38 It was their opinion that as a matter of
law, the lex loci governed contracts regardless of the intention of the parties.39
The doctrine of party autonomy distinguished itself from the classic lex loci
approach by emphasizing the parties’ power over choice of law.40 Realizing
the fact that there were elements that did not fit the mold of an analysis geared
to the reach of local law,41 Dumoulin advanced “the idea that those who enter
into an agreement may stipulate the law that governs their bargain.”42 Due to
his influence, reliance on the intention of the parties became the governing
principle of choice of law in contracts, and as a result lex loci contractus was
soon replaced with party intention.43
31 Id. at 574.
33 Id.
34 Lorenzen, supra note 3, at 573.
36 Id.
37 Id.; see also FRIEDRICH K. JUENGER, CHOICE OF LAW AND MULTISTATE JUSTICE 11–16 (1993),
reprinted in GENE R. SHREVE, A CONFLICT-OF-LAWS ANTHOLOGY 7, 8–10 (1997).

38 Lorenzen, supra note 3, at 573. It should be noted that in the era of statutists, the statutes were divided
into two general categories: personal and real (or territorial). The real statute applied only within the territory
of the city whose law it was, while the personal statute followed the person (city’s citizenry) wherever he or
she might go. See DAVID CAVERS, THE CHOICE-OF-LAW PROCESS 2 (1965).
40 Id.
41 Id.
42 JUENGER, supra note 37, at 11.
At the time of Dumoulin, the party autonomy doctrine seemed to have at

least two distinctions. First, the intention of the parties could be expressed or
implied. The “tacit agreement” was actually an extension of the principle of
party autonomy to encompass situations in which the parties had failed to
designate the applicable law.44 Second, the intention of the parties governed
the validity and effects of a contract, and the law so intended applied to the
whole contract.45 Also, in developing his autonomy theory, Dumoulin viewed
the intention of the parties “in a context where he discussed those parts of
substantive law where the intention and will of the parties prevailed.”46
The doctrine of party autonomy was soon “so widely accepted by the
countries of the world that it belongs to the common core of the legal
systems.”47 The general acceptance of the doctrine was, of course, due to the
scholarly work and influence of major conflicts authors after Dumoulin,48
particularly Friedrich Carl von Savigny, the great German jurist who
“suggested that every legal relationship be governed by the law of the state or
nation . . . in which it has its seat.”49
In the case of obligations, Savigny looked to “the intimate connection
between the forum and the territorial law.”50 He believed that the local law of
obligations “depends on a voluntary subjection,” which is the ground of
prorogated jurisdiction.51 There is thus undoubtedly a relation between taking
on an obligation and the forum in which it will be enforced.52 Savigny urged
that in finding the “seat,” the primary factor should be the parties’ intention; if
such intention was not clearly manifested, it should be inferred from the
circumstances under which the obligation arose.53
44 See JUENGER, supra note 37, at 14. As Lorenzen pointed out, “[t]he application of the law of another
state in the matter of contracts is, in the eyes of Dumoulin, not so much the application of a law, as the
enforcement of a tacit agreement assumed and sanctioned by such law, to which he attributes the same force as
is possessed by an express agreement.” Lorenzen, supra note 3, at 573.
45 See Lando, supra note 2, at 6.
46 Id.
47 Id. at 3.
48 These authors include Dutch jurist Ulrich Huber, U.S. jurist Joseph Story, English scholar Albert Venn
Dicey, and French professor Henri Batiffol. See generally Mathias Reiman, Savigny’s Triumph? Choice of
Law in Contracts Cases at the Close of the Twentieth Century, 39 VA. J. INT’L L. 571, 583–98 (1999).
49 Id. at 594–95; see also Lorenzen, supra note 3, at 574.
50 FRIEDRICH KARL VON SAVIGNY, A TREATISE ON THE CONFLICT OF LAWS 133 (William Guthrie trans.,
Rothman Reprints 2d ed. 1972) (1880). The treatise was the eighth volume of Savigny’s System of Modern
Roman Law, originally published in the 1840s. Id. at 9, 39.
51 Id. at 196.
52 Id.
53 See id. at 134; see also Reimann, supra note 10, at 595.
In modern conflict of laws theory, party autonomy doctrine bears a great

resemblance to Dumoulin’s conception with regard to the fundamental idea
that the intention of the parties has the effect of determining which legal
system governs the contract and how the legal system is to be selected.
Beyond this similarity, however, there are clear differences in terms of the
substance of the doctrine. The differences exist because many issues related to
party autonomy were impossible for Dumoulin to envision centuries ago.
The first difference is the scope of party autonomy. In Dumoulin’s time,
when parties exercised their power to designate the law governing their
contract, it seemed unclear what matters in the contract the governing law
would determine. As Hessel Yntema pointed out, “Dumoulin in the sixteenth
century was apparently concerned, on the ground of the intention of the parties,
to ensure [sic] extra-territorial application of the law of the husband’s domicile
to matrimonial settlements.”54 But it was believed that the party autonomy
doctrine was introduced as a rule of validation, meaning that the intention of
the parties determines the law governing the validity of the contract.55
Although in the nineteenth century the party autonomy doctrine applied to both
the determination of the validity of contracts and the determination of the
rights and duties arising out of valid contracts,56 most discussions about the
doctrine were centered on the validity of the contracts.57
In the modern era of conflict of laws, however, the party autonomy doctrine
focuses more on the rights and obligations of the parties to a contract or on the
contents of a contract rather than simply on a contract’s validity.58 Presently,
choice of law clauses are typically phrased to cover “any dispute arising from
or out of the contract” or “all rights and obligations of the parties” in respect to
the contract.59 From the choice of law standpoint, it appears both necessary
and logical to treat differently the validity of a contract and the contents of a
54 Hessel E. Yntema, “Autonomy” in Choice of Law, 1 AM. J. COMP. L. 341, 342 (1952).
55 See Albert A. Ehrenzweig, Contracts in the Conflict of Laws: Part One: Validity, 59 COLUM. L. REV.
973, 1024–25 (1959).
57 See generally Ehrenzweig, supra note 55, at 1024–25.
58 See generally Michael Gruson, Governing Law Clauses in Commercial Agreements—New York’s
Approach, 18 COLUM. J. TRANSNAT’L L. 323, 323 (1980).

59 See Ronald A. Brand, Uni-State Lawyers and Multinational Practice: Dealing with International,
Transnational, and Foreign Law, 34 VAND. J. TRANSNAT’L L. 1135, 1156 (2001); see generally Convention
on the Law Applicable to Contracts for the International Sale of Goods, Oct. 30, 1985, 1489 U.N.T.S. 3, 24
I.L.M. 1573 [hereinafter Hague Convention]; Gruson, supra note 58, at 323–26.
contract. In many cases, discussions about validity now address the validity of
the choice of law clause rather than the validity of the contract itself.60
Theoretically speaking, the validity of a contract in most cases affects the
fate of the contract as a whole, while the contents of a contract are concerned
with the substantive matters of the contract. To illustrate, if a contract is
deemed invalid pursuant to the law chosen by the parties, then there will be no
contract at all and all issues related to the rights and obligations of the parties
under the contract are moot. However, if a contract is invalid under the law of
the place where the contract is formed, it will remain invalid at the place of
contracting, even though the parties have designated the law of another country
under which the contract is considered valid. In this situation, an inherent risk
is that the validity of the contract may be challenged no matter what effect it
may have as to the contents of the contract under the applicable law designated
by the parties.
Another change related to the scope of party autonomy is the development
of the doctrine of dépeçage, or “splitting,”61 that “allows different aspects of a
contract to be governed by different systems of law.”62 Under this doctrine,
the parties may agree to split their contract, so that its parts are subject to
different laws. In other words, the parties to a contract may designate the law
applicable to the contract as a whole or applicable only to a particular issue.63
For example, if dépeçage is admitted, the parties to a contract may choose the
law of the place of contract to govern the formation of the contact and the law
of the place of performance to determine the performance of the contract.
It is believed that the use of dépeçage came in response to the idea of
splitting the contract, which is said to have originated in Germany where
Savigny advanced his “seat” theory.64 According to Savigny, each type of legal
60 See, e.g., Gruson, supra note 58, at 326.

61 The French term is translated as “dismemberment.” BLACK’S LAW DICTIONARY 469 (8th ed. 2004).
62 Lando, supra note 2, at 3. The term is more colloquially used to mean “picking-and-choosing.” Willis
L.M. Reese, Dépeçage: A Common Phenomenon in Choice of Law, 73 COLUM. L. REV. 58, 58 (1973).
63 According to Reese,
Dépeçage can be defined broadly to cover all situations where the rules of different states are
applied to govern different issues in the same case. It can be defined more narrowly to be present
only when the rules of different states are applied to govern different substantive issues, and the
most restrictive definition would confine the term to situations where by applying the rules of
different states to different issues a result is reached which could not be obtained by exclusive
application of the law of any one of the states concerned.
Reese, supra note 62, at 58.
relationship had a seat.65 Thus, “in bilateral contracts in which each party is to
perform his obligation in a different country, the application of the law of the
place of performance may lead to the application of two different laws.”66
Dépeçage came to be accepted and understood as a choice of law process that
permits application of the rules of different states to determine different
issues.67 The use of dépeçage thus became “an integral part of the modern
[choice of law] approach.”68 Today, dépeçage is not only frequently employed
by the court, but is also widely adopted by parties in the determination of
applicable law.69
Related to the issue of the scope of party autonomy is the task of
identifying what choosing foreign law actually means. Parties might choose
the “whole law” of a particular state or country or only its substantive law (also
termed “internal law”).70 The whole law of a designated state or country
would include that state or country’s conflict of laws rules. If the chosen law
is deemed the “whole law,” the problem of “remission” (referring back) or
“transmission” (referring away) would be encountered.71 This problem is
commonly characterized as renvoi.72 Renvoi takes place when “the forum
applies a foreign choice-of-law rule that selects law different from that chosen
by [the parties or determined under] the forum’s rule.”73 As a by-product of
the existence of different choice-of-law rules in different states or countries,
renvoi complicates the choice-of-law matter by making the determination fall
within an endless circle.74
Since the problem of renvoi became an issue, scholars have debated the
proper solution. At one end of the spectrum is the opinion that renvoi should
be rejected by simply ignoring the choice of law rules of the other state or
65 Id.
66 Id.
67 See CURRIE ET AL., supra note 13, at 242.
68 Reese, supra note 62, at 75.
69 For example, according to U.C.C. section 1-301, the parties may through their agreement choose the
law to determine “any or all of their rights and obligations.” U.C.C. § 1-301 (2003). This provision
effectively allows the parties to have their contractual rights and obligations subject to different laws. See id.
70 Erwin N. Griswold, Renvoi Revisited, 51 HARV. L. REV. 1165, 1166 (1938). According to Griswold,
“renvoi” first made its appearance in English legal print as early as 1898. Id. at 1165. Renvoi is French for
“send back” or “remit.” Larry Kramer, Return of the Renvoi, 66 N.Y.U. L. REV. 979, 979 (1991).
71 Kramer, supra note 70, at 979.
72 Id. at 980.
73 WEINTRAUB, supra note 25, at 88.
74 A concern is that in the situation of renvoi, “[e]ach state would direct the case back to the other state’s
whole law, locking the court in an endless cycle of references back and forth.” Kramer, supra note 70 at 979.
Thus, “if every state accepted the renvoi, no case could ever be decided.” CURRIE ET AL., supra note 13, at 66.
country75 or that renvoi should be avoided completely by substituting choice of

law rules with an alternative interest analysis scheme.76 At the other end of the
spectrum is the argument in favor of renvoi. Those who endorse renvoi argue
that courts should accept it because the rights provided by another state are by
definition the rights that would be provided by the courts in that state.77 They
believe that applying foreign choice of law rules in many cases would in fact
be very simple, and recognition of the foreign choice of law rules would not
necessarily lead to an endless chain of reference.78
Today, many countries reject these two extremes and adopt a measured
acceptance of renvoi. In Germany, for example, courts will follow “a reference
to a third country ‘so far as [doing so] does not contradict the meaning of the
renvoi.’”79 In the United States, the Second Restatement of Conflict of Laws
recognizes renvoi in the situation where “the objective of the particular choice-
of-law rule is that the forum reach the same result on the very facts involved as
would the courts of another state.”80 In China, it is suggested that renvoi
applies in matters regarding personal or family status, and the reference is to
the law of China.81 Given the complexity of the renvoi problem, when drafting
an international contract, lawyers often prefer to add to choice of law clauses
phrases such as, “excluding the choice of law rules,” to avoid the problem of
renvoi in advance.
The change in the scope of party autonomy can also be seen in the
application of international treaties or customs. As noted, the original
75 For example, under the First Restatement of Conflict of Laws, the courts were generally directed to
ignore foreign choice of law rules. See RESTATEMENT (FIRST) OF CONFLICT OF LAWS § 7 (1934).
76 The most striking example in this regard is the government interest analysis approach advanced by
Brainerd Currie. In explaining his interest analysis approach, Currie made the following comments about
renvoi:
[T]he problem of the renvoi would have no place at all in the analysis that has been suggested.
Foreign law would be applied only when the court has determined that the foreign state has a
legitimate interest in the application of its law and policy to the case at bar and that the forum has
none. Hence, there can be no question of applying anything other than the internal law of the
foreign state.
BRAINERD CURRIE, SELECTED ESSAYS ON THE CONFLICT OF LAWS 184 (1963).
77 See ERNST RABEL, THE CONFLICT OF LAWS: A COMPARATIVE STUDY 79 (2d ed. 1958). See also
Griswold, supra note 70, at 1188–93.

78 See Griswold, supra note 70, at 1190.
79 WEINTRAUB, supra note 25, at 88 (quoting Einführungsgesetz zum Bürgerlichen Gesetzbuch
[EGBGB] [Intro. Act Civil Code], Aug. 15, 1896, RGBI. at 604, art. 4).
80 RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 8(2) (1988).
81 CHINESE SOCIETY OF PRIVATE INTERNATIONAL LAW, MODEL LAW OF PRIVATE INTERNATIONAL LAW
OF THE PEOPLE’S REPUBLIC OF CHINA art. 8 (6th drft. 2000) [hereinafter MODEL LAW OF CHINA].
implication of party autonomy was the power of parties to a contract to choose

the law of a particular state or country to be the law governing the contract.
Autonomy is now being extended to allow parties to choose international
customs or treaties on civil or commercial matters.82 In the international trade
area, for example, many common usages codified as “Incoterms”83 (e.g., FOB,
CIF, and C&F) are used quite frequently in international contracts. A typical
clause in this regard is as follows: “This Contract shall be governed by I.C.C.
INCOTERMS (1990 Edition).”84
The most cited international treaty for international contracts is the
Convention on International Sale of Goods (CISG).85 The application of a
treaty is generally conditioned on country membership, which means that the
forum will apply the treaty to which the forum country is a party. However, a
choice of treaty provision included in a contract by private contracting parties
may be upheld by a court if such application is permissible under the law of the
forum even if the forum country is not party to the treaty.86 In China, for
instance, contracting parties may agree to have their contract governed by
international customary rules or by an international treaty concerning civil and
commercial matters.87
The second difference of the evolved party autonomy doctrine is the
limitation imposed on the freedom of parties to choose the law governing their
contracts. The limitation can be further divided into two categories: limitations
on formality and limitations on contents. The basic idea of party autonomy, as
developed in the writings of Dumoulin, was to promote free choice by
honoring the intention of the parties.88 But how is the intention of the parties
to be determined, and how far does the intention of the parties reach in terms
of their freedom to choose the applicable law?
82 See generally INTERNATIONAL CHAMBER OF COMMERCE, INCOTERMS 2000: ICC OFFICIAL RULES FOR
THE INTERPRETATION OF TRADE TERMS (2000).
83 Id. at 5. “INCOTERMS” stands for “International Commercial Terms” and was first published in
1936 by the International Chamber of Commerce (ICC). Since that time there have been six different
revisions and updates to the INCOTERMS. Export.gov, Incoterms, http://www.export.gov/logistics/exp_
finance_incoterms.asp (last visited Nov. 1, 2006). The 2000 edition of Incoterms can be purchased at
www.iccbooks.com.
84 RALPH H. FOLSOM, MICHAEL WALLACE GORDON & JOHN A. SPANOGLE, JR., INTERNATIONAL
BUSINESS TRANSACTIONS: A PROBLEM ORIENTED COURSEBOOK 105 (4th ed. 1999).

85 See Hague Convention, supra note 59.
86 FOLSOM ET AL., supra note 84, at 13–14.
87 MODEL LAW OF CHINA, supra note 81, art. 111.
The first question obviously deals with the issue of formality. In many
countries, the intention of the parties with respect to choice of law could be
exercised expressly or tacitly.89 In some other countries, however, the
contractual choice of law is limited to the choice expressly made by the parties;
no tacit choice is recognized.90 In the countries where the tacit choice is
accepted, the tacit choice of law should be based on a “rebuttable presumption
in favor of the law that will validate the contract.”91 When the intention of the
parties with regard to the applicable law is implied in the contract, it is
normally the court’s function to make a determination of the parties’
intention.92 “[I]t is the task of the court to discover what that intention is.”93
The limitation on the contents of choice of law primarily concerns the law
that the parties agreed to in the contract. It is undisputed that party autonomy
gives the parties the freedom to select governing law, but such freedom is not
absolute. The scope of the intention of the parties actually concerns the
boundary to which the parties’ choice is subjected. As the party autonomy
doctrine has developed, the boundaries have evolved into three major areas:
the pubic policy exception, the mandatory rule mandate, and the reasonable
connection requirement.
The first area discussed is the public policy exception. Public policy,
sometimes referred to as public order (or ordre public),94 is a common device
that courts employ to prevent the application of the foreign law that the parties
agreed to in the contract.95 Generally, the forum state invokes the public
policy exception when the forum considers the applicable foreign law
incompatible with the public policy of the forum.96 In the context of choice of
law, public policy is generally understood to include fundamental social values
89 Id. at 46.
90 In China, for example, a well-settled “judicial rule” in the determination of the validity of the choice of
law by the parties to a contract is that choice of law by the parties must be express, and the parties’ intention
regarding the governing law of their contract may not be assumed. See Supreme People’s Court, The Answers
to Questions about Application of the Foreign Economic Contract Law of China (Oct. 19, 1987), available in
Chinese at http://www.law-lib.com/law/law_view.asp?id=4615.
91 WEINTRAUB, supra note 25, at 445; see also J.G. CASTEL, INTRODUCTION TO CONFLICT OF LAWS 196–
97 (4th ed. 2002).

92 Morris J. Levin, Party Autonomy: Choice-of-Law Clauses in Commercial Contracts, 46 GEO. L. J. 260,
269 (1958).
93 Id.
94 See Edith Friedler, Party Autonomy Revisited: A Statutory Solution to a Choice-of-Law Problem, 37 U.
KAN. L. REV. 471, 513–14 (1989). Some argue that the concepts of order public and public policy are not
interchangeable because order public is generally deemed broader than public policy. Id.
95 See MCCLEAN, supra note 1, at 47–49.
96 Levin, supra note 92, at 264.
and morals, principles of justice, and public welfare. However, some have
criticized the concept of public policy as “a vague and variable
phenomenon.”97
When applied to party autonomy, public policy enables the forum to
disregard the parties’ choice of law and apply the forum law (the lex fori)
instead to protect the interests of the forum.98 Even though public policy
varies from state to state, there is a commonly accepted notion that the public
policy exception should not be applied every time there is a discrepancy
between foreign law and the forum law.99 Rather, it becomes relevant only
when the differences rise to the level of a profound violation of the policies
and interests of the forum state.100 In addition, the courts also rely on the
public policy exception when the court determines that the parties’ choice of
law aims to evade the laws of the forum that exist for the purpose of protecting
the country’s own citizens.101 Thus, a choice of law may be set aside if it was
made with an evasive intent.102 In conclusion, the party’s intent in choosing
the applicable law must be both “bona fide and legal.”103
If the forum state refuses to apply the law chosen by the parties because of
public policy, the “mandatory rule” effectively excludes or restricts the parties’
power to initially make the choice. The term mandatory, as applied here,
means that the parties’ choice of law shall not show prejudice against the
application of the law of the forum or related country that cannot be derogated
from by the contract.104 In other words, the application of the law of the forum
state to which a party is a citizen is mandatory, the parties may have no choice
but to apply the law as such.
There are different forms of the mandatory rule limiting party autonomy.
One form of the rule restricts the parties’ choice of law to certain specific legal
issues. An example of this form of mandatory rule is illustrated in parties’
civil capacity to contract. In Quebec, the capacity to contract concerns the
97 See Monrad G. Paulsen & Michael I. Sovern, “Public Policy” in the Conflict of Laws, 56 COLUM. L.
REV. 969, 973 (1956).

98 Id.
99 Mertz v. Mertz, 3 N.E.2d 597, 600 (N.Y. 1936) (Crouch, J., dissenting).
100 See Paulsen & Sovern, supra note 97, at 1015–16; see also RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 187 cmt. g (1988).

101 See Friedler, supra note 94, at 492; see also Frame v. Merrill Lynch, 97 Cal. Rptr. 811, 814 (Cal. Ct.
App. 1971).
103 See id. (citation omitted).
civil status of the contracting parties.105 Therefore, the rule is governed by

what is known as personal law, which is the law of the contracting person’s
domicile or his or her country of nationality.106 Thus, if the contractual parties
make a choice regarding the law governing their contractual capacity, the
parties must choose the personal law of their domicile or country, or their
choice is invalid. Another example of an area in which the mandatory rule
limits the parties’ choice of law is real property.107 Based on a theory of real
and actual control, one settled choice of law rule is that the law of the
property’s location governs real property interests.108
Another form of the mandatory rule specifies certain types of contracts or
transactions that prohibit the parties from choosing the applicable governing
law. This form of the mandatory rule is also called the directly applicable rule,
which applies to all transactions covered by the rule, regardless of the law that
would otherwise govern.109 For example, under Chinese contract law, the
application of Chinese law is mandated when the contract forms one of the
following relationships: a Chinese-foreign equity joint venture, a Chinese-
foreign contractual joint venture, or a Chinese-foreign cooperative exploration
and development of natural resources contract that is to be performed within
China.110 Consequently, in these contracts, the parties are limited to the
application of Chinese law, and any agreement to apply foreign law in those
contracts will be null and void.111 In addition, some argue that the parties’
105 CASTEL, supra note 91, at 197.

106 Regarding civil capacity, the application of the law other than personal law (e.g. the law of the place of
contract or the lex loci contractus) is objectionable because by selecting a favorable place (locus) a party could
evade an incapacity imposed upon him or her by his or her personal law which has the most real and
substantial connection with the transaction. In addition, it is believed that the law of the place of contract is not
satisfactory when the place is uncertain or fortuitous. See id.; see also Lando, supra note 2, at 93–97.
107 For the purpose of this Article, the issue concerning real property arises from the disposal of the
property by the parties specified in a previous contractual choice of law agreement.

108 See generally Michael S. Finch, Choice-of-Law and Property, 26 STETSON L. REV. 257 (1996).
109 H.L.E. Verhagen, The Tension Between Party Autonomy and European Union Law: Some
Observations on Ingmar GB Ltd. v. Eaton Leonard Technologies, Inc., 51 INT’L & COMP. L.Q. 135, 135
(2002).
110 See Contract Law (adopted and promulgated by the 2d Session of the 9th Nat’l People’s Cong., March
15, 1999, effective Oct. 1, 1999), art. 126, translated in THE CONTRACT LAW OF THE PEOPLE’S REPUBLIC OF
CHINA (1999) (P.R.C.) [hereinafter CONTRACT LAW OF CHINA]. An English translation is available at Chinese
Civil Law Forum, Contract Law of the People’s Republic of China, http://www.cclaw.net/download/
contractlawPRC.asp (last visited Nov. 1, 2006).
111 A joint venture contract between a Chinese company and its foreign counterpart may be signed
anywhere outside the territory of China, and then foreign law could be chosen as governing law. See
CONTRACT LAW OF CHINA, supra note 110, art. 126. But if the contract (or most of the contract) is to be
performed in China, the choice of foreign law will not be recognized by the Chinese court if a dispute over the
contract is brought before the court. See generally id. Even if the case is heard by a foreign court, the
choice should be limited to the laws of the place of performance. In general, a

contract will not be enforceable if it violates the laws of the country where the
contract is to be performed.112
The third area that limits the parties’ choice of law is the reasonable
connection requirement. The reasonable connection requirement limits the
parties’ choice of law unless the parties can show that the law chosen bears a
certain level of relationship with either the parties or the transaction itself.
This relationship is often referred to as a “local contact,” which means that the
applicable law intended by the parties is related to the locales that the contract
involves.113 One rationale underlying the reasonable connection requirement,
whether it is persuasive or not, is the concern about the possible evasion of the
law that otherwise would be applied.
One argument in support of the reasonable connection requirement is that
the requirement would make it “difficult for the parties to evade mandatory
rules of law of countries connected with the contract by selecting a law which
lacks any substantial connection with the agreement.”114 Others argue that “by
preventing the parties from arbitrarily choosing a governing law, the local
statutes and policies will be better protected.”115 The theoretical basis
upholding the reasonable connection requirement is that “the parties, and their
contracts, are creatures of the state wherein they reside and act, and that they
cannot avoid the consequences of the local law by stipulating for a foreign
law.”116
Another question is how the forum decides what connection is reasonable
enough to validate the parties’ choice of law. Obviously, there is no clear-cut
standard. Some scholars suggest that the connection is reasonable when a
significant portion of either the making or the performance of the contract
takes place in the chosen forum.117 Others regard the determination of a
reasonable connection as a process of weighing all factors through which the
enforcement of the foreign court judgment may become an issue in China because the judgment may be
deemed invalid due to the application of non-Chinese law. See generally id.
112 See J. H. C. MORRIS, DICEY & MORRIS ON THE CONFLICT OF LAWS 776 (9th ed. 1973).
114 Id.
116 Id.
117 For example, according to the official comments to the previous U.C.C. section 1-105(1) that required
“reasonable relation” between the chosen law and the related jurisdiction, ordinarily, the law chosen must be
that of a jurisdiction where a significant enough portion of the making or performance of the contract is to
occur or occurs. U.C.C. § 1-105 cmt. 1 (1989).
chosen law is related to the parties or the transactions, because it is likely and
logical that the parties will choose a law clearly connected with the contract,
and with which they are acquainted.118
The most recent development in party autonomy is the extension of this
philosophy to the contractual parties’ choice of forum. As a result, party
autonomy is now equipped with duel functions: choice of law and choice of
forum. In M/S Bremen v. Zapata Off-Shore Co., the United States Supreme
Court upheld a choice of forum clause and rejected the traditional notion that
the effect of a choice of forum clause was to “oust the jurisdiction of the
courts.”119 The Bremen court held that the parties’ choice of forum clause
would be upheld unless either party could prove that enforcement of the clause
would be unreasonable and unjust.120
However, since the ruling in Bremen was specific to maritime law,121 it is
unclear whether the Bremen rule should be interpreted broadly and also
extended to non-maritime cases.122 The most recent international effort to
uphold a choice of forum was the adoption of the Convention on Choice of
Court Agreements by the member states of the Hague Conference on Private
International Law, including the United States, in June 2005.123 The
Convention’s mission is “to promote international trade and investment
through enhanced judicial co-operation” providing uniform rules on
jurisdiction and on recognition and enforcement of foreign judgments in civil
or commercial matters.124
Under the Convention, the parties many enter into an “exclusive choice of
court agreement”125 and such agreement, if it meets the requirements of the
Convention, will be recognized and enforced in all member states.126 Pursuant
118 Levin, supra note 92, at 264. Connections that are generally acceptable to the court include: “[t]he
place of making or the place of performance; place of the situs of security; place of the domicile of one or both
of the parties; place with an integral interest and connection with the contract; . . . rules that are well known to
a professional or business group; . . . and possibly even a stipulation for internationally known customs, such
as general maritime law.” Id.
119 407 U.S. 1, 12 (1972).
120 See id.
121 Id. at 10.
122 Note, Recent International Agreement—Convention on Choice of Courts Agreement, 119 HARV. L.
REV. 931, 935 (2006).

123 Id.
124 Convention on Choice of Court Agreements, June 30, 2005, 44 I.L.M 1294.
125 Id. art. 1.
126 Id.
to the basic rules of the Convention, a court chosen by the parties “shall not
decline to exercise jurisdiction on the ground that the dispute should be
decided in a court of another State,”127 and a court not chosen must dismiss the
case.128 The Convention grants the parties great autonomy in selecting the
forum to which the parties are willing to submit their disputes for adjudication.
Some scholars predict that the Convention, once ratified in the United States,
will have a significant impact on the standardization of U.S. domestic personal
jurisdiction laws.129
Interestingly, although in the United States contractual choice of law came
to the center of discussion and debates long before contractual choice of forum
became an issue, it appears that the rules applying to the contractual choice of
forum now look less controversial and more settled than those of contractual
choice of law. As is discussed below, contractual choice of law in the United
States is unfortunately one of the most confusing subjects in the conflict of
laws.
II. PARTY AUTONOMY IN AMERICAN CHOICE OF LAW: A MESS
In the United States, choice of law is one of the most complex areas of the
conflict of laws.130 In fact, “the question of which law governs a contract with
contacts in two or more jurisdictions has been the focus of considerable
controversy among courts and legal scholars.”131 Contractual choice of law in
the United States is both highly intricate and confusing. One attribute to this
fact is the existence of a vast disagreement “as to what in fact is the prevailing
view among courts and as to the theoretically sound rule.”132
Courts in the United States addressed the issue of party autonomy as early
as 1825 in Wayman v. Southard.133 In Wayman, the U.S. Supreme Court held
that “in every forum a contract is governed by the law with a view to which it
was made.”134 The Wayman holding was later readdressed by the Court more
specifically in Pritchard v. Norton.135 In that case, the Court made it clear that
127 Id. art. 5(2).

128 Id. art. 6.
129 Note, supra note 122, at 936.
130 See Reese, supra note 5, at 679.
131 Note, supra note 4, at 553.
132 Id.
133 23 U.S. (10 Wheat.) 1 (1825).
134 Id. at 48.
135 106 U.S. 124 (1882).
“the law we are in search of . . . is that which the parties have, either expressly
or presumptively, incorporated into their contract as constituting its
obligation.”136 Pritchard is regarded as the leading case in which the Supreme
Court expressed a preference for the doctrine of party autonomy.137
The Supreme Court’s ruling in Pritchard not only marked an acceptance of
party autonomy by the U.S. judiciary, but also was important because, with
regard to the choice of law by the parties, the Supreme Court took the position
that to apply the law chosen by the parties is to incorporate the provision of
foreign law as a term of the contract. In choice of law theory, there are two
different approaches pertaining to the law chosen by the parties: party
reference and incorporation. The party reference approach regards the choice
as “an express or tacit choice of [applicable] law which constitutes the
connecting factor. It forms part of the conflict [of laws] rule of the forum
which renders applicable the law so chosen.”138 To make a distinction between
the party reference and incorporation on its face may seem pedantic, but the
distinction indeed has practical significance.139
Despite the Pritchard court’s recognition of the parties’ choice of law, the
party autonomy doctrine met resistance among scholars.140 The opposition to
allowing parties the choice of law governing their contract came from the fear
that the doctrine would give the parties legislative power that private parties
were not supposed to have.141 As Professor Joseph Beale, the reporter of the
First Restatement of Conflict of Laws and a leading opponent of party
autonomy, explained, “[t]he fundamental objection to this in point of theory is
that it involves permission to the parties to do a legislative act. It practically
136 Id. at 136.

137 VERNON ET AL., supra note 10, at 468; see also Ehrenzweig, supra note 55, at 998–99.
139 One significant result is related to the application of mandatory rules. If there is a party reference, the
mandatory requirements of legal systems other than that selected by the parties are disregarded; if there is an
incorporation, the mandatory rules of the applicable law of the contract designated by the conflict of law rules
of the forum apply, and the provisions of the law selected by the parties apply only to questions which in the
applicable law are regulated by directory rules. Id. at 14. The other significant consequence is the change in
the law between the time of making the contract and its performance. The applicable law is considered a
living law and must be applied as it is when the contract is to be performed and not as it was when the contract
was made. However, where a foreign statute is incorporated in a contract as a contractual term, it remains part
of the contract, although as a statute it may have been amended or repealed. See MCCLEAN, supra note 1, at
331–32.
140 See 2 JOSEPH BEALE, THE CONFLICT OF LAWS 1079–81 (1935).
141 See id. at 1080.
makes a legislative body of any two persons who choose to get together and
contract.”142
Beale’s objection to party autonomy was based on the theory of vested
rights, which was also the foundation of the First Restatement of Conflict of
Laws. 143 Beale believed that “any obligation created by a given law attaches
itself to the person of the obligor and will be enforced by any State into which
he [travels or does business].”144 Thus to determine the law creating the
obligation, it is essential to locate the State where the last act necessary to
bring the obligation into existence occurred. 145 Because of Beale’s position,
party autonomy did not find its place in the First Restatement of Conflict of
Laws.146
Fortunately, the denial of party autonomy by Beale and the First
Restatement did not lay this doctrine to rest.147 Many critics of the First
Restatement advocated that the choice of law selected by the parties should
govern the contract.148 In fact, many of the approaches adopted in the First
Restatement and their underlying theories were soon found to be outdated;
many fundamental rules were proved wrong and some of the remaining rules
encountered increasing criticism and doubt.149 The criticism later evolved to
become an intellectual movement in the United States known as the American
conflict of laws revolution, which reached its peak during the 1950s and
142 Id. at 1079–80.

143 The vested rights theory was a territorial notion that dominated academic analysis in the American
choice of law for many years. See MCDOUGAL ET AL., supra note 16, at 325. This theory, as illustrated by
Beale, embraces the notion that the law is a general rule to govern future transactions, and its method of
creating rights is to provide that a right shall accrue when a certain event happens. 1 JOSEPH BEALE, THE
CONFLICT OF LAWS 105 (1935). According to Beale, when a right has been created by law, this right itself
becomes a fact and the recognition of its existence should follow everywhere. See id.
144 Willis L.M. Reese, Contract and the Restatement of Conflict of Laws, Second, 9 INT’L & COMP. L.Q.
531, 532 (1960).

145 See id. at 533. “In the case of a contract,” the State as such is “where the act that formally made the
contract binding took place.” Id.

146 The First Restatement, which was drafted under the auspices of the American Law Institute, was very
influential in the United States in the middle of twentieth century and was followed almost universally in
judicial practices. As Professor Symeonides observed, although scholars criticize the Restatement from its
very inception, “most American courts eventually adopted it, albeit with varying degrees of enthusiasm.”
Symeon C. Symeonides, The American Choice-of-Law Revolution in the Courts: Today and Tomorrow, 298
RECUEIL DES COURS 9, 34 (2002).
147 See VERNON ET AL., supra note 10, at 468.
1960s.150 The revolution gravely challenged and eventually crippled the

foundations of the U.S. conflict of laws system.151
As a result, to build or rebuild U.S. conflict of laws became a mission
facing scholars and the courts. A striking achievement representing the efforts
in this regard was the adoption of the Second Restatement of the Conflict of
Laws in 1971, over seventeen years after the initiative of the American Law
Institute to replace the First Restatement.152 Although the Second Restatement
may symbolize the end of the American conflict of laws revolution, it did not,
and could not, provide a panacea to resolve conflict of laws problems. As a
matter of fact, many provisions in the Second Restatement were regarded as
replicates of the First Restatement provisions.153
As far as choice of law is concerned, the main theme of the Second
Restatement is the doctrine of the most significant relationship.154 In the
contract area, the most substantial change, as compared with the First
Restatement, is the adoption of the party autonomy doctrine, which is aimed at
giving the parties wide power to choose the law governing their contract.155
Unfortunately, the Second Restatement, though influential, is only one of
several approaches employed by U.S. courts.156 Consequently, since the
collapse of the First Restatement, the party autonomy doctrine in the United
States has been facing a variety of interpretations.157 Even today, there still
appears to be substantial uncertainty with regard to the theoretical foundation
of the party autonomy doctrine.158
Today, the power of the parties to choose the law governing a contract is a
firmly established principle in most systems of law.159 However, in the United
150 See Symeonides, supra note 146, at 35–38.

151 See id. at 25.
152 The drafting of the Second Restatement began in 1953 and was completed in 1971. The project took
some 17 years to be finished because, as some commentators indicated, the field was evolving rapidly and it
was difficult to achieve consensus. See CURRIE ET AL., supra note 13, at 200.
153 See id. at 203.
154 Under this doctrine, the applicable law is the local law of the state which, with respect to the particular
issue (e.g. torts or contract), has the most significant relationship with the parties and disputes. See
RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 145, 188 (1988).
156 According to a survey, as of 2004, less than fifty percent of the states in the United States followed the
Second Restatement approach. See Symeonides, supra note 18, at 944.

157 See Robert Johnson, Party Autonomy in Contracts Specifying Foreign Law, 7 WM. & MARY L. REV.
37, 39 (1966).
158 See Borchers, supra note 15, at 432.
States it is hard to say that this principle is well settled despite the fact that
party autonomy is generally accepted. Thus, for a foreign lawyer or even a
U.S. lawyer, it is indeed a headache to predict the outcome of a contractual
choice of law clause in U.S. courts because often the issue is dependent on the
decision of a particular court undertaken on a case-by-case basis. As a result,
the co-existence of multiple approaches and practices in handling choice of law
clauses has rendered the application of the party autonomy doctrine chaotic.
A. The Second Restatement Approach: Policy-Based Party Autonomy

The Second Restatement grants parties to a contract the right to determine
for themselves which law shall govern the contract.160 However, “the right to
choose” is apparently confined within the notion of the most significant
relationship.161 In addition, like all other rules prescribed in the Second
Restatement, party autonomy is subject to the governing principles of choice of
law stated in section 6.162 Thus, on the one hand, the party autonomy rule in
the Second Restatement reflects a legitimate concern for facilitating the
planning of interstate and international commercial transactions.163 On the
other hand, the most significant relationship approach makes it impossible to
adequately enforce the doctrine of party autonomy.164
The doctrine of party autonomy is addressed in section 187 of the Second
Restatement. Under section 187, the parties to a contract may choose the
governing law for issues the parties could or could not have resolved by an
explicit provision in their agreement.165 However, the choice of law will not
be honored if there is no substantial relationship between the chosen state, the
parties, and their transactions or if there is no reasonable basis for the parties’
choice. Further, the application of chosen law will be denied if there is a
violation of a fundamental policy of the state whose law would otherwise
apply. Moreover, for the purpose of section 187, the law chosen by the parties
will be the local law of the state in question unless the parties indicate
otherwise.166
160 See id.

161 See id.
162 See generally WEINTRAUB, supra note 25, at 438.
163 See id. at 469.
164 See Friedler, supra note 94, at 489.
165 RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 (1988).
166 Section 187 provides:
Section 187 imposes two major restrictions on party autonomy: connection

and public policy.167 The connection may be established by a substantial
relationship or on a reasonable basis justifying the application of the law
chosen.168 Perhaps realizing the difficulty in determining the substantiality of
certain relationships for the purpose of choice of law,169 the Second
Restatement sets forth a set of choice of law principles in section 6 aimed at
providing factor-specified guidance to the courts.170 In addition, the court,
when applying the principles of section 6 to determine the applicable law, may
refer to section 188, which contains a laundry list of the possible contacts a
contract might have.171
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.
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
(a) the chosen state has no substantial relationship to the parties or transaction and there is no
other reasonable basis for the parties’ choice, or
(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.
3. In the absence of a contrary indication of intention, the reference is to the local law of the state
of the chosen law.
Id.
167 Id. § 187 cmts. f-g.
168 Id. § 187 cmt. f.
170 Restatement Second section 6 provides the following factors:
1. A court, subject to constitutional restrictions, will follow a statutory directive of its own state
on choice of law.
2. When there is no such directive, the factors relevant to the choice of the applicable rule of law
include
a. the needs of the interstate and international systems,
b. the relevant policies of the forum,
c. the relevant policies of other interested states and the relative interests of those states in the
determination of the particular issue,
d. the protection of justified expectations,
e. the basic policies underlying the particular field of law,
f. certainty, predictability and uniformity of result, and
e. ease in the determination and application of the law to be applied.
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 (1988).
171 Under section 188, the possible contacts to be considered under the section 6 analysis include:
(a) the place of contracting,

With regard to the choice of law, section 6 focuses on policy concerns, and
the very basic assumption is that choice of law rules are the product of
politics.172 Therefore, many of the factors listed in section 6 are policy-based
and require more elaboration from the courts. Although it is claimed that the
Second Restatement is designed to state rules rather than policies,173 the
policies as stated in section 6 play a dominant, if not decisive, role in the
determination of the applicable law. In one respect, a court would need to
consider all factors when appropriate and try to identify the relative weight of
each factor. In another respect, the parties’ autonomy in selecting governing
law is surrounded by the policy analysis under the requirement of a
“significant relationship” or a “reasonable basis.”174
Furthermore, under section 6, the court will not only follow the relevant
policies of the forum, but will also consider the relevant policies of other
interested states and the basic policies underlying the particular field of law. In
each case, all of the policies must be considered, and the choice of law rule
developed must give effect to the most important policies for the precise
purpose at hand.175 However, because the policies in any given case may not
necessarily point in the same direction, the significance of a particular factor
will vary depending on the context.176 Perhaps for this reason, the Second
Restatement has been criticized for being too rigid and amorphous,177 which
would defeat the goals of certainty, predictability, and uniformity of result that
the Second Restatement was designed to achieve.
(b) the place of negotiation of the contract,

(c) the place of performance,
(d) the location of subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the
parties.
Id. § 188.
173 Id. at 692.
174 Id. at 697.
175 See id. at 698.
176 See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 cmt. c (1988).
177 According to Professors Lea Brilmayer and Jack Goldsmith, the Second Restatement is arguably too
rigid because it proceeds by way of rebuttable presumptions about which state is the one with the most
significant relationship. See LEA BRILMAYER & JACK GOLDSMITH, CONFLICT OF LAWS: CASES AND
MATERIALS 216–17 (2d ed. 1995). It is arguably too amorphous because it relegates a judge to shuffling
around a variety of enumerated factors in an effort to find out which state’s relationship is most significant.
See id.
The restriction on party autonomy on the grounds of public policy has the
effect of excluding foreign law chosen by the parties. In general, a court will
disregard a foreign law if the application of it would violate the public policy
of the forum state,178 or in Judge Cardozo’s famous words, “violate some
fundamental principle of justice, some prevalent conception of good morals,
some deep-rooted tradition of common weal.”179 It is also commonly
understood that a court may not refuse enforcement of a foreign law just
because it strongly disagrees with it.180 Under the Restatement Second, to be
fundamental, a policy must be very substantial.181
The Second Restatement is somewhat troublesome because section 187
looks to at least three different states when considering public policy: the
forum state, the chosen state, and the state having greater interest.182 Section
187 requires that the application of the law of the chosen state not 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 section 188, would be the state whose law is applicable in the
absence of an effective choice of law by the parties.183 Thus, when analyzing
public policy, the court would have to evaluate the fundamental policy of the
non-forum states, which is a great burden to the court and is generally
unrealistic in international cases.184
For example, in Hodas v. Morin, a Connecticut couple (the genetic father
and mother) entered into a gestational carrier agreement with a New York
couple (the gestational carrier and her husband), under which the gestational
carrier was implanted with an embryo produced from the genetic father’s
sperm and the genetic mother’s egg.185 The agreement contained a choice of
law clause establishing Massachusetts law as the governing law of the

179 Loucks v. Standard Oil Co., 120 N.E. 198, 202 (N.Y. 1918).
180 For example, “[i]n English domestic law it is now well settled that the doctrine of public policy should
only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not
depend on the idiosyncratic inferences of a few judicial minds.” See MCCLEAN, supra note 1, at 47.
181 See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 cmt. g (1988).
182 See id.
183 Id. §§ 187, 188.
184 Id. § 187 cmt. g. Pursuant to section 187, if the parties contracted in a country whose legal system is
unfamiliar to them and relatively immature (under U.S. standard), the reasonable basis may be claimed for the
choice of an unrelated law on the ground that the parties know it well and that it is sufficiently developed. See
id. at § 187 cmt. f.
185 814 N.E.2d 320, 323 (Mass. 2004).
contract.186 Pursuant to the agreement, the child was to be born at a

Massachusetts hospital and the child was to be the child of the genetic
parents.187 The genetic father and mother brought an action in Massachusetts
seeking paternity and maternity rights and a pre-birth order establishing their
custody of the child.188 Their claim was initially dismissed by the probate and
family court.189 On appeal, the Supreme Judicial Court of Massachusetts
transferred the case, vacated the judgment, and remanded the case.190
Three states were involved in the Morin case and each state viewed the
gestational carrier agreement differently. Connecticut did not expressly
prohibit it, Massachusetts recognized and would have upheld such an
agreement in some circumstances, but New York had a strong public policy
against it.191 In light of the different State policies and the intent of the parties
to follow Massachusetts law, the Court made a two-tiered analysis under
section 187(2) of the Second Restatement, that is, an analysis involving
“substantial connection” and “fundamental public policy.”192 In reviewing the
first tier, the Court readily concluded that Massachusetts’ relationship with the
transaction was substantial because under the agreement, Massachusetts was
the intended place for “the birth to occur,” “the birth certificate to issue[,]” and
“the prenatal care to [be] receive[ed].”193
In dealing with the policy matter, the Court examined the policies of both
New York and Connecticut and found that the interests of these two states
were material and significant, but might be at conflict in this case.194 The
Court further opined that given the difficulty in determining the place of
contracting, place of negotiation, and the subject matter of the contract, New
York’s policy would not operate to overrule the parties’ choice of law because
it was doubtful that New York law would have been applicable absent any
articulated choice by the parties.195
The Morin decision illustrates how public policy is employed in a court’s
decision to deal with a contractual choice of law clause. What is interesting in
186 Id.
187 Id.
188 Id. at 320.
189 Id.
190 Id.
191 See id. at 324.
192 See id. at 325.
193 See id. at 322.
194 See id. at 325.
195 See id.
this case is the Court’s analysis on the policy of a related state (non-forum
state) having an opposite provision of law. The Court looked at the public
policy of a different state and evaluated that policy in light of the actual
connection the other state had with the dispute. The Court did not apply New
York law despite New York’s public policy prohibiting gestational carrier
contracts because, in the Court’s own view, New York lacked substantial
connection to the matter.196 Despite the persuasive nature of Morin’s analysis,
it seems almost certain that such analysis does not work in the cases in which
the legal system of a foreign country is involved.
B. Interest Analysis Approach: Dominance of Government Interest

One of the most influential modern American choice-of-law theories is the
governmental interest analysis approach, introduced by the late Professor
Brainerd Currie.197 It has been claimed in the United States that after Brainerd
Currie, the “dark science called the conflict of laws can never be the same
again.”198 Currie’s idea was deemed revolutionary because he rejected all
choice-of-law rules by arguing that the central problem of conflict of laws was
“that of determining the appropriate rule of decision when the interests of two
or more states are in conflict—in other words, of determining which interest
shall yield.”199 Believing in government interest analysis, Currie made his
famous and bold assertion that we would be better off without choice-of-law
rules.200
Currie divided all conflict of laws cases into three major categories: true
conflict cases, false conflict cases, and unprovided-for cases.201 In each of
these cases, Currie opined that the court should inquire into the policies
expressed in the respective laws and into the circumstances in which it is
reasonable for the respective states to assert an interest in the application of
these policies.202 In making these determinations, the court should employ the
ordinary processes of construction and interpretation.203 The fundamental
196 See id. at 325–26.

197 See Herma H. Kay, A Defense of Currie’s Governmental Interest Analysis, 215 RECUEIL DES COURS 9,
25 (1989).
198 See id. at 21.
199 CURRIE, supra note 76, at 178.
200 See id. at 180.
201 Id. at 107–17, 152–56.
202 See Kay, supra note 197, at 50–56.
203 Id. at 77.
notion of Currie’s approach was that states have an interest in the outcome of
conflict of laws cases.204
Currie’s emphasis on government interest stressed that the important factor
in choice-of-law cases was the legitimate interests of the states involved.205
Thus, under Currie’s approach, “no law should be applied in a choice-of-law
case unless (a) doing so would advance the policy interests of at least one state
that (b) had a legitimate ‘interest’ (or ‘contact’) with the problem, an interest
that must be evaluated in light of the facts of each case.”206 The “interest,” as
defined by Currie, is “the product of (a) a government policy and (b) the
concurrent existence of an appropriate relationship between the state having
the policy and the transaction, the parties, or the litigation.”207
Currie’s approach was intended to replace the choice-of-law rules with the
methodology of the government interest analysis.208 On the notion that the
courts would “do well to scrap the system of choice-of-law rules for
determining the rule of decision,”209 Currie regarded the “examination of the
content of the competing domestic laws [as] an essential part of the choice of
law process.”210 Interestingly, Currie developed his government interest
analysis doctrine through looking into married women’s contracts.211 He was
not interested in the intentions of the parties or the party autonomy principle;
rather, Currie indulged in finding out the state interest implied in the policy
behind the competing married women laws.212
Thus, under Currie’s approach, there is no need to consider the intentions
of the parties in the choice-of-law process because party autonomy is
overtaken by the legitimate state interest.213 According to Currie, in
204 See Symeonides, supra note 146, at 38.

205 VERNON ET AL., supra note 10, at 347.
206 Id.
207 CURRIE, supra note 76, at 621.
208 See Kay, supra note 197, at 44.
209 Id. at 185.
210 Id. at 88.
211 See Brainerd Currie, Married Women’s Contracts: A Study in Conflict-of-Law Method, 25 U. CHI. L.
REV. 227 (1958).

212 According to Professor Trautman, Currie’s theory was similar to Beale’s in that choice-of-law clauses
would enable “the parties . . . at their will [to] free themselves from the power of the law which would
otherwise apply to their acts.” Donald T. Trautman, Some Notes on the Theory of Choice of Law Clauses, 35
MERCER L. REV. 535, 538 (1984) (quoting BEALE, supra note 140, at 1080).
213 In Currie’s view,
The rule that the law intended by the parties shall govern (in so far as it is not a pure fiction,
totally incapable of explaining the choice) accords to the incapacitated party the power to
determining applicable law, the court should first determine the government
policy and then inquire whether the relationship of the forum state to the case
at bar is such as to bring the case within the scope of the state’s governmental
concern.214 In this regard, Currie’s approach is to a great extent actually a
local government interest oriented approach.
Currie’s government interest analysis, though innovative, appears to have
at least two problems. First, as many scholars point out, Currie’s vague
methodological scheme induces both ambiguities and uncertainties about what
the interest analysis is all about.215 Using Currie’s analysis, courts often are
unable to successfully identify interest-based policies underlying a state law,
particularly when the laws of another state are at issue.216 Second, the interest
analysis approach was derived mostly, if not entirely, from the analysis of U.S.
interstate conflict of laws cases, and therefore has little international
application due to the fact that interstate conflict of laws is much more limited
in scope than international conflicts.217 The disparity between different
national legal systems is much greater than the disparity between the laws of
different states in the United States.218
C. New York Approach: Quantified Party Autonomy

New York may encounter more foreign contractual cases (both interstate
and international) than any other U.S. state because of New York’s role as a
leading global commercial and financial center.219 In dealing with choice of
law, New York courts have a reputation for recognizing party autonomy. In
the past, under the New York common law rules, the law chosen by the parties
would be applied if two requirements were met: (a) there is a choice of law
clause in the contract and (b) the chosen jurisdiction has a relationship with the
contract.220 In their practice, New York courts employed the “reasonable
contract out of her disability—a privilege she may be assumed not to enjoy in a purely domestic
case; and the result is pro tanto the supervision of the interest of the state to which she belongs.
Currie, supra note 211, at 248.
214 See Brainerd Currie, The Constitution and the Choice of Law: Governmental Interests and the Judicial
Function, 26 U. CHI. L. REV. 9, 10 (1958).

215 See BRILMAYER & GOLDSMITH, supra note 177, at 59.
216 See VERNON ET AL., supra note 10, at 361.
217 See Paul Heinrich Neuhaus, Legal Certainty Versus Equity in the Conflict of Laws, 28 LAW &
CONTEMP. PROBS. 795, 807 (1963).

218 Id.
219 See Gruson, supra note 58, at 325.
220 See id. at 329–30.
relationship”221 test as well as a modified interest analysis test to determine the

“relation” that would justify the applicable law governing contracts.222
In 1984, New York altered the common law rules for contractual choice of
law by enacting a statute known as Title 14 of the New York Law of General
Obligations.223 By codifying choice-of-law rules that apply to certain
contracts, the statute proposes to afford parties a great deal of autonomy to
stipulate New York law as the governing law for their contract. The
underlying legislative intent is said to help maintain the preeminent status of
New York City in the global market.224 The legislation also reflects New
York’s infusion of international concerns in contractual choice of law.
The most notable distinguishing characteristic of Title 14 is its departure
from the common law tradition of the State of New York by repealing the
requirement of a “reasonable relationship” for the contractual choice of law.225
There are two sections under Title 14: section 5-1401 and section 5-1402.
Section 5-1401 requires that the choice of New York law by the parties as the
governing law to their contract be enforced regardless of whether such
contract, agreement or undertaking bears a reasonable relationship to the state
if (a) the contract in question does not involve labor; personal, family, or
household services; or a special, third-party agreement and (b) the amount
involved is not less than $250,000.226
221 The reasonable relationship approach was established by the New York Court of Appeals in A.S.
Rampell v. Hyster Co., 144 N.E.2d 371, 379 (N.Y. 1957).

222 In Auten v. Auten and Haag v. Barnes, the New York Court of Appeals followed a method of
“grouping of contacts” analysis including an analysis of the governmental interests of the jurisdictions whose
substantive law might be applicable. See Auten v. Auten, 124 N.E.2d 99, 101–02 (N.Y. 1954); Haag v.
Barnes, 175 N.E.2d 441, 443–44 (N.Y. 1961). In Intercontinental Planning, Ltd. v. Daystrom Inc., the New
York Court of Appeals applied interest analysis in determining the law governing a contract and held that the
interest analysis approach gave paramount control over the legal issues arising out of a particular factual
context to the place having the most interest in the problem. See 248 N.E.2d 576, 582 (N.Y. 1969).
223 N.Y. GEN. OBLIG. LAW §§ 5-1401, 5-1402 (McKinney 2001).
224 See Barry Rashkover, Title 14, New York Choice of Law Rule for Contractual Disputes: Avoiding the
Unreasonable Result, 71 CORNELL L. REV. 227, 240 (1985).

225 See N.Y. GEN. OBLIG. LAW §§ 5-1401, 5-1402.
226 In accordance with section 5-1401,
The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration

of, or relating to any obligation arising out of a transaction covering in the aggregate not less than
two hundred fifty thousand dollars, including a transaction otherwise covered by subsection one
of section 1-105 of the uniform commercial code, may agree that the law of this state shall
govern their rights and duties in whole or in part, whether or not such contract, agreement or
undertaking bears a reasonable relation to this state. This section shall not apply to any contract,
agreement or undertaking (a) for labor or personal services, (b) relating to any transaction for
Section 5-1402 provides for personal jurisdiction in cases in which foreign

parties stipulate New York law as the governing law, the parties agree to the
jurisdiction of New York courts, and the contract involves at least
$1,000,000.227 In this situation, New York courts may not dismiss the case on
the grounds of forum non conveniens.228 Section 5-1402 determines the choice
of New York law and the jurisdiction of New York courts on the basis of
consent and the specified minimum dollar amount.229 The assumption is that
New York maintains a well-developed system of commercial jurisprudence
and that parties venturing great sums of money would prefer to have their
disputes tried in New York courts.230
Thus, party autonomy in New York is quantified by monetary amounts
pursuant to Title 14. When the required amount is reached, the parties’ choice
will become determinative. Otherwise, the parties’ choice is merely a factor in
the application of New York law. Put differently, if the dollar amount
involved is below the required level, the parties’ choice of New York law may
not be deemed effective when there is no reasonable relation between the
transactions and the state.
Title 14 attempts to convert the abstract relationship requirement into a
concrete monetary amount in the context of determination of contractual
choice of law. Such a transfer is perhaps a logical outcome of the paradox
facing the state legislature of New York. On the one hand, the state has a
paramount interest in keeping New York an international business center by
providing all business players with ease of access to its legal system.231 On the
personal, family or household services, or (c) to the extent provided to the contrary in subsection
two of section 1-105 of the uniform commercial code.
N.Y. GEN OBLIG. LAW § 5-1401.
227 Id. § 5-1402.
228 Under section 5-1402, any person may
[M]aintain an action or proceeding against a foreign corporation, non-resident, or foreign state

where the action or proceeding arises out of or relates to any contract, agreement or
understanding for which a choice of New York law has been made in whole or in part pursuant to
section 5-1401 and which (a) is a contract, agreement or undertaking, contingent or otherwise, in
consideration of, or relating to any obligation arising out of a transaction covering in the
aggregate, not less than one million dollars, and (b) which contain a provision or provisions
whereby such foreign corporation or non-resident agrees to submit to the jurisdiction of the
courts of this state.
Id.
229 Id.
230 See MCDOUGAL ET AL., supra note 16, at 510.
231 See Rashkover, supra note 224, at 240.
other hand, the state is afraid of moving out of the boundaries set by the U.S.
Constitution.232
However, the New York approach has inherent defects. The most obvious
is that the choice of law provision in Title 14 is one-sided in favor of applying
New York law.233 To be more specific, it applies only to the case in which
New York law is chosen. If there is a choice of foreign law, the New York
common law approach will still come into play. The other problem, as
previously stated, is that Title 14 seems to promote a money-based rather than
a rule-based choice of law approach. Because of its clear focus on local
interest, Title 14 has a narrow application and may hardly help create a
uniformly accepted norm of legal certainty that the choice of law rule is
expected to achieve.234
D. The Uniform Commercial Code Approach: Differentiated Party Autonomy

Article 1 of the U.C.C. was revised in 2001. In the revision, section 1-301
was adopted to replace former section 1-105 concerning contractual choice of
law.235 This replacement is regarded as a representation of a significant
rethinking of choice-of-law issues,236 and as a product of the efforts to try to
align the U.C.C. with settled international commercial practice.237 To the
extent that the parties are allowed to stipulate by themselves the governing law
of their contract, section 1-301 takes a big step forward. However, due to
various policy concerns and the possible abuse of free choice,238 section 1-301
provides for limited party autonomy in a particular way and treats the parties’
power of choice of law differently depending on the nature of the contract.
As noted, the major deviation of section 1-301 from its predecessor is the
deletion of a “reasonable relation” requirement for contractual choice of law in
order to afford greater autonomy to the parties.239 But under section 1-301, the
greater autonomy, as such, may only be exercised within the “safeguards” that
are deemed important to protect “consumer interests and fundamental
232 For a general discussion, see id. at 248.

233 Id. at 242–46.
234 See generally Friedler, supra note 94, at 525.
235 See U.C.C. § 1-301 cmt. (2003).
236 See id.
237 See Appendix A: Letter from Friedrich Juenger to Harry C. Sigman, Esq., (June 23, 1994), 28 VAND. J.
TRANSNAT’L L. 445, 447 (1995) [hereinafter Juenger Letter].

238 See U.C.C. § 1-301 cmt. (2003).
239 See id.
policies.”240 In the context of section 1-301, the safeguards contain three

rules.241
The first rule is the separation of consumer transactions from non-consumer
transactions. As provided in section 1-301(e)(1), if one of the parties to a
transaction is a consumer, for the choice of law agreement to be effective, the
transaction must bear a reasonable relation to the state or country
designated.242 A consumer is defined in the U.C.C. to mean an individual who
enters into a transaction primarily for personal, family, or household
purposes.243 Thus, the removal of the reasonable relation requirement for the
contractual choice of law under section 1-301 is limited to so-called business-
to-business transactions.
The second rule concerns the restriction of the parties’ autonomy to chose
foreign law in wholly domestic transactions. For the purpose of choice of law,
section 1-301 distinguishes a domestic transaction from an international one.
In the domestic transaction, the parties may designate the law of any state but
not the law of a foreign country,244 while in the international setting, the
transaction need not bear a relation to the designated state or country.245 Put
differently, only in a domestic transaction are the parties restricted from
choosing foreign law as the governing law. In this connection, a domestic
transaction is defined as a transaction that does not bear a reasonable relation
to a country other than the United States.246
The third rule is the public policy exception. Pursuant to section 1-301(f),
the contractual choice of law clause may not be effective if application of such
law would be contrary to a fundamental policy of the state or country whose
law would govern in the absence of the choice-of-law agreement.247 It is clear
that under section 1-301(f), a court would have to look into the fundamental
240 Id.
241 See id.
242 See id. § 1-301(e)(1).
243 Id. § 1-201(12). In addition, “consumer transaction” is defined as “a transaction in which (i) an
individual incurs an obligation primarily for personal, family or household purposes, (ii) a security interest
secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family or household
purposes.” Id. § 9-102(a)(26). The term “consumer transaction” includes “consumer-goods transactions.” Id.
244 See id. § 1-301 cmt. § 4.
245 See id. § 1-301 cmt. § 5.
246 See id. § 1-301 cmt. § 4.
247 See id. § 1-301(f). Also under section 1-301(d), in the absence of an agreement, the rights and
obligations of the parties are determined by the law that would be selected by the application of the forum
state’s conflict-of-law principles. Id. § 1-301(d).
policy of the related state or country in order to justify the application of the
law chosen by the parties. However, when there is no valid choice-of-law
agreement, it is unclear whether the fundamental policy of the forum state must
also be considered even if the forum state is not the state whose law is to be
applied under its conflict of laws principles.248
III. INTERNATIONAL APPLICATION OF PARTY AUTONOMY: A RULE-BASED

METHODOLOGY
In the international context, party autonomy is a well-recognized principle

in the determination of the applicable law of contracts. There is a general
consensus in the international business community that parties have the right to
choose the law that governs an international contract.249 Under the
International Institute for the Unification of Private Law’s Principles of
International Commercial Contracts (“UNIDROIT Principles”), which try to
give the broadest possible interpretation to the concept of “international,” an
international contract is defined as any contract other than that in which “all
the relevant elements of the contract in question are connected with one
country only.”250
It seems unquestionable that to deal with international contracts,
harmonized efforts are required among the countries and synthesized rules are
essential to resolve choice-of-law issues. Thus, it is not surprising to see that
“[t]he positivistic, interest-oriented approaches that have become popular in
the United States have not become widely accepted in the rest of the world.”251
In international business transactions, it is most important to have principles or
standards that can be commonly accepted and practiced. To reach this goal,
two values appear to be fundamental: unification and harmonization. To
realize these two values, it is a prerequisite that the principles and standards
developed be rule-based.
248 A judge deciding a conflict of laws question may hold that “[t]he foreign law ordinarily applicable will
not be applied in this case because to do so would violate our public policy.” Paulsen & Sovern, supra note
97, at 969.
249 See Lando, supra note 2, at 3–4; see also INTERNATIONAL INSTITUTE FOR THE UNIFICATION OF
PRIVATE LAW, PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS, pmbl.(4)(a), 34 I.L.M. 1067 (1994)
[hereinafter UNIDROIT Principles].
250 UNIDROIT Principles, supra note 249, pmbl.(1).
In the last few decades, many efforts have been made to regulate
contractual choice of law internationally. The preference has been to formulate
“multilateral rules of the conflict of laws based on connecting factors which
give foreign law and the lex fori [forum law] an equal standing to be
applied.”252 The most striking achievement in this regard has happened in two
stages. The first is the adoption of international conventions on contractual
choice of law, and the second is the codification into domestic law of the
principles or rules set forth by an international convention. There is perhaps a
third stage that is called international “non-legislative means” of unification of
contract law,253 or “international restatement” of contract principles.254
The first notable convention is the European Community’s Convention on
the Law Applicable to Contract Obligations (“Rome Convention”).255 The
Rome Convention was adopted in 1980 by the European Community as an
attempt to establish uniform rules concerning the law applicable to contractual
obligations.256 Another influential convention is the 1985 Convention on the
Law Applicable to Contracts for the International Sale of Goods (“Hague
Convention”), which was adopted by the Hague Conference on Private
International Law to unify the choice of law rules relating to contracts for the
international sale of goods.257
Also important is the 1994 Inter-American Convention on the Law
Applicable to International Contracts (“Mexico City Convention”), in the
formation of which the United States participated although it did not sign the
Convention.258 A product of the “laudable and long-standing cooperation of
Latin American nations in the field of conflict of laws,”259 the Mexico
Convention is aimed at codifying the contractual choice of law among its
member states, which “represents the consensus of a considerable number” of

253 See UNIDROIT Principles, supra note 249, pmbl.
254 See Borchers, supra note 15, at 423.
255 Convention on the Law Applicable to Contractual Obligations, pmbl., 1980 O.J. (L 266) 1 (EC), 19
I.L.M. 1492 [hereinafter Rome Convention].

256 The Convention entered into force on April 1, 1991 after it took effect in England. See id. art. 1.
257 Hague Convention, supra note 59, at 1575.
258 Organization of American States, Inter-American Convention on the Law Applicable to International
Contracts, Mar. 17, 1994, 33 I.L.M. 732 [hereinafter Mexico City Convention]; Friedrich K. Juenger, The
Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and
Comparisons, 42 AM. J. COMP. L. 381, 382 (1994).
259 Juenger, supra note 258, at 386.
Latin American nations that practice both civil law and common law.260 The
international “non-legislative means” of unification of contract law mainly
refers to the UNIDROIT Principles that established the general rules for
international contracts.261
These conventions share a commonality—their strong endorsement of the
party autonomy doctrine.262 In an attempt to avoid the possible uncertainty
that parties from different countries may encounter when choosing their
contract’s governing law, the conventions try to leave as much freedom as they
can to the parties and to set forth clear rules that can be easily followed.263
Through these conventions, what is easily discernable is a clear trend in
contractual choice of law—international integration and harmonization are
sought by removing differences in the legal framework among countries in
order to facilitate contracting internationally.
The most distinctive characteristic of the international application of party
autonomy is that the parties’ freedom of choice of governing law is protected
by the uniform rules stipulated in the conventions. For example, Article 3(1)
of the Rome Convention explicitly states that a contract shall be governed by
the law chosen by the parties.264 The choice must be expressed or
demonstrated with reasonable certainty by the terms of the contract or
circumstances of the case, and by their choice, the parties can select the law
applicable to the whole or to only a part of the contract.265
A similar provision can also be found in the 1985 Hague Convention.266
Under Article 7(1) of the Hague Convention, a contract of sale is governed by
the law chosen by the parties.267 Viewed in its entirety, the parties’ agreement
on this choice must be express or clearly demonstrated by the terms of the
260 Id. at 382 (“The Mexico City Conference was attended by 17 Latin American countries as well as the
United States and Canada.”).
261 The UNIDROIT Principles are applied when the parties have agreed to govern their contract by them
or when the parties have agreed to govern their contract by general principles of law, the lex mercatoria
(commercial law). They are also intended to provide a solution to an issue raised when it proves impossible to
establish the relevant rule of the applicable law, to be used to interpret or supplement international uniform law
instruments, and to serve as a model for national and international legislators. PETER NYGH, AUTONOMY IN
INTERNATIONAL CONTRACTS 184 (1999); see UNIDROIT Principles, supra note 249, pmbl.
262 Juenger, supra note 258, at 383.
263 Id.
264 See Rome Convention, supra note 255, art. 3.
265 See id.
266 See Hague Convention, supra note 59, art. 7(1).
267 See id.
contract and the conduct of the parties.268 In addition, the choice as such may
be limited to only a part of the contract.269 The Mexico City Convention
essentially follows the Rome Convention model and provides the parties with
ample freedom to choose the law they wish to govern their contracts.270 The
Mexico City Convention also brings into the mainstream certain “Central and
South American states whose present law largely does not permit party
autonomy in choice of commercial law.”271
Generally speaking, there are several important rules that prescribe party
autonomy in making international contracts under the provisions of the
conventions. The first rule is obviously the “no relation” or “no interest
analysis” rule. None of the conventions impose on the parties any requirement
of “relation” or “reasonable relation” between the chosen law and the
transaction or the parties, nor do any of the conventions mandate any interest
analysis in the application of foreign law.272 Therefore, under any of the
conventions, private parties may select as governing law to their contract any
law they like.273
The second rule is the so-called “mandatory rule.”274 As noted, directly
affecting the parties’ freedom to choose governing law under the conventions,
the mandatory rule refers to the rule that cannot be derogated from by
contractual agreement.275 The concept of mandatory rule and its application as
prescribed in the Rome Convention and the Mexico City Convention seem
268 See id.

269 See id.
270 Juenger, supra note 258, at 383. In accordance with the Mexico City Convention,
The contract shall be governed by the law chosen by the parties. The parties’ agreement on this
selection must be express or, in the event there is no express agreement, must be evident from the
parties’ behavior and from the clauses of the contract, considered as a whole. Said selection may
relate to the entire contract or to a part of same.
Mexico City Convention, supra note 258, art. 7.
271 Harold S. Burman, International Conflict of Laws, The 1994 Inter-American Convention on the Law
Applicable to International Contracts, and Trends for the 1990s, 28 VAND. J. TRANSNAT’L L. 367, 381 (1995).
272 See generally Hague Convention, supra note 59; Mexico City Convention, supra note 258.
273 See generally Hague Convention, supra note 59; Mexico City Convention, supra note 258.
274 See Burman, supra note 271, at 382.
275 Under Article 3(3) of the Rome Convention,
The fact that the parties have chosen a foreign law, whether or not accompanied by the choice of
a foreign tribunal, shall not, where all the other elements relevant to the situation at the time of
the choice are connected with one country only, prejudice the application of the rules of the law
of that country which cannot be derogated from by contract, herein called “mandatory rules.”
Rome Convention, supra note 255, art. 3(3).
hard for common law lawyers to understand. Basically, the term “mandatory”
means that the rule cannot be excluded by a contract term and is a “directly
applicable rule capable of overriding the chosen law.”276
The mandatory rule within the meaning of Article 3(3) of the Rome
Convention is said to be mandatory only in the domestic setting, which states
that the parties may not derogate from these rules as a matter of national
law.277 As it has been pointed out, Article 3(3) envisages a situation in which
all elements of the factual situation are connected with a country, the law of
which contains relevant mandatory rules.278
Under the Rome Convention, the application of the mandatory rule is
limited to cases in which all the elements relevant to the situation at the time of
the choice are connected with only one country.279 In the context of the
Convention, the mandatory rule also includes the rule of the law of the forum
in a situation in which that rule is mandatory.280 In addition, the mandatory
rule exception applies to certain cases in which consumer protection or
employee protection is at issue and the relevant law affording such protection
is compulsory.281
The third rule is the “exclusion rule,” which mainly limits the parties’ free
choice of governing law from exceeding the scope of the application of the
rules of the conventions.282 Under the Rome Convention, for instance, the
chosen law shall be the law of a certain country, and therefore a direct
276 Verhagen, supra note 109, at 143.

277 Id.
278 According to Prof. McClean,
Article 3(3) envisages a situation in which all elements of the factual situation are connected with
Country A, the law of which contains a relevant mandatory rule. The parties, for whatever
reason, agree that the law of Country B is to govern their contract. They have that freedom of
choice, and Article 3(3) does not remove it; the law of Country B will indeed be the governing
law. However, the mandatory rules of Country A will also apply, and within their scope will
override any different rules in the law of Country B.
MCCLEAN, supra note 1, at 330.
279 See id. at 330–31.
280 Article 7(2) of the Rome Convention provides that, “[n]othing in this Convention shall restrict the
application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law
otherwise applicable to the contract.” Rome Convention, supra note 255, art. 7(2).
281 The provisions are provided in Article 5: Certain Consumer Contracts and Article 6: Individual
Employment Contracts. See id. arts. 5, 6.

282 See generally Kurt H. Nadelmann, Impression and Unification of Law: The ECC Draft Convention on
the Law Applicable to Contractual and Non-Contractual Obligations, 24 AM. J. COMP. L. 1, 5 (1976).
application of international treaty or customs is excluded.283 Additionally, the

rules of the Rome Convention apply only to contractual obligations not
involving or relating to personal status or legal capacity, or certain legal
relations such as, among others, will and succession, property rights, family
matters, agency, trust, and procedures.284
The forth rule is the “time rule.” Under the time rule, the parties are
granted the freedom to choose the governing law to the contract at any time,
which means that the parties’ choice of law may not necessarily be made at the
time of contract.285 For example, pursuant to Article 3(2) of the Rome
Convention, “[t]he parties may at any time agree to subject the contract to a
law other than that which previously governed it, whether as a result of an
earlier choice under this Article or of other provisions of this Convention.”286
In other words, the parties may provide and may change a governing law by
agreement at any time.287 But the change or modification of the chosen law
may not affect the validity of the original contract nor the rights of a third
party.288
The fifth rule is the “rule for dépeçage.”289 All of the conventions allow
the parties to select a law to govern the whole or part of the contract.290 The
partial selection has the effect of enabling the parties to opt for a consensual
dépeçage by submitting different parts of a single contract to different laws.291
As a matter of fact, the splitting of the contract between different legal systems
can be done by reference to different duties of performance or different
numbered clauses in the contract.292 Once again, the choice does not have to
be made at the same time the contract is made.
283 See Rome Convention, supra note 255, art. 1(1).

284 The exclusion further includes negotiable instruments, corporate matters, arbitration agreements,
forum choice agreements, and certain insurance and re-insurance contracts. See id. art. 1.
285 NYGH, supra note 261, at 101.
286 Rome Convention, supra note 255, art. 3(2).
287 See id.
288 Under Article 3(2) of the Rome Convention, “Any variation by the parties of the law to be applied
made after the conclusion of the contract shall not prejudice its formal validity under Article 9 or adversely
affect the rights of third parties.” Id.
289 See NYGH, supra note 261, at 122.
290 Id. at 128.
291 Id.
292 See generally id. at 123.
The sixth rule is the “rule of implication.”293 Under the conventions,

choice of governing law by the parties does not have to be express. The choice
may be implied from the terms of the contract and the conduct of the parties.294
The implication of parties’ choice is the inference of the parties’ intent to select
particular law that could be demonstrated by the clauses of the contract and
behavior of the parties.295 In many cases, the implication is the process of
“applying sound ideas of business, convenience, and sense to the language of
the contract itself, with a view to discovering from it the true intention of the
parties.”296
The seventh rule relates to the rule of “public policy.”297 All of the
conventions explicitly provide that the application of law selected by the
parties may be refused on public policy grounds.298 But public policy, as used
in the conventions, is limited to the public policy of the forum.299 For instance,
under Article 16 of the Rome Convention, “[t]he application of a rule of the
law of any country specified by this Convention may be refused only if such
application is manifestly incompatible with the public policy . . . of the
forum.”300
The contractual choice-of-law rules provided in the conventions indicate at
least two things. First, party autonomy is commonly accepted as an
international principle and has a universal application in the global business
community, although differences may exist in certain countries with regard to
the scale of the autonomy as well as the scope of the parties’ choice.301
Second, it seems to have become a growing trend that the parties are given
maximum freedom to select the law they wish to govern their contract and the
way to make such selection is as flexible as possible.
293 Id. at 104.

294 Id. Each of the conventions contains a similar provision of implied choice of law. For example,
according to Article 7 of the Mexico City Convention, “The parties’ agreement on this selection must be
express or, in the event that there is no express agreement, must be evident from the parties’ behavior and from
the clauses of the contract, considered as a whole.” Mexico City Convention, supra note 258, art. 7.
296 See MCCLEAN, supra note 1, at 323 (citation omitted).
298 Id.; see also Mexico City Convention, supra note 258, art. 18; Hague Convention, supra note 59, art.
18; Rome Convention, supra note 255, art. 16.

300 See Rome Convention, supra note 255, art. 16.
301 The European Community is reviewing the Rome Convention in an attempt to convert the Convention
into a Community instrument proper (regulation or directive) and to modernize the substance. See Green
Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations
into a Community Instrument and its Modernization, at 13, COM (2002) 654 final (Jan. 14, 2002).
The codification of domestic law that contains international rules can be

readily seen in many member states of the conventions. An obvious outcome
of these international rules is the unified application of the rules in domestic
courts of different countries in dealing with international contracts. Today, the
rules of the Rome Convention are in force in all the member states of the
European Union302 and many of the member states either directly apply the
provisions of the Rome Convention or incorporate the rules of the Convention
into domestic code.303
In Italy, for example, there are no special rules on the applicable law of
contracts but only the references to the provisions of the Rome Convention.304
It is specified in the Italian Statute on Private International Law that the Rome
Convention shall govern contractual obligations in all cases.305 In the United
Kingdom, the Contracts (Applicable Law) Act 1990 gives effect to the Rome
Convention in the law of the country, which makes the Convention applicable
to all contracts thereafter and replaces, with very limited exceptions, the
common law choice of law rules.306
IV. ESSENCE OF PARTY AUTONOMY: FREEDOM OF CONTRACT
Despite the differences in understanding of the theoretical underpinnings of

party autonomy, the very foundation on which party autonomy stands is the
concept of freedom of contract, a theory that developed under and is supported
by the laissez faire philosophy from which the free economy evolved.307 In the
conflict of laws literature, this subject has been debated and discussed for
centuries.308 The international community has generally agreed that as long as
the parties are free to make a contract, they should have the same freedom to
select the law to govern the contract, subject to certain limitations imposed by
302 See Proposal for an EU Regulation on the Law Applicable to Non-Contractual Obligations Has Been
Put Forward by European Commission, http://ec.europa.eu/justice_home/fsj/civil/applicable_law/fsj_civil_

applicable_law_en.htm (last visited Nov. 1, 2006).
303 Id.
304 See Tito Ballarino & Andrea Bonomi, The Italian Statute on Private International Law of 1995, II
Y.B. OF PRIVATE INT’L L. 9, 124 (2000).

305 Id.
306 See MCCLEAN, supra note 1, at 324.
307 See Ian Baxter, International Business and Choice of Law, 36 INT’L & COMP. L.Q. 92, 95 (1987); see
also Lando, supra note 2, at 15.

the law.309 It has been held that “party autonomy mirrors, on the conflicts
level, the substantive principle of freedom of contract.”310
From the viewpoint of the conflict of laws, the importance of granting
autonomy to the parties lies with the belief that the will of the parties is
sovereign in the field of contract.311 One of the very basic policies of conflict
of laws, as many have indicated, is to prevent the application of a legal system
which the parties never thought would apply.312 Therefore, “[p]arties should
still be free to provide in their contract that the rule of decision should be found
from the legal system of a designated country, and this designation should be
respected and applied by the forum.”313 With such free choice, the parties
should be able, subject to certain limitations, to determine the law that governs
their contract, so as to foretell with accuracy their rights and obligations under
the contract.314
There seems to be a general agreement in modern conflict of laws that in
order to protect the justifiable expectations of the contracting parties, there is a
real need for choice of law rules that will help achieve certainty, predictability,
and uniformity of results.315 A notion underscoring this agreement is that the
choice of law rules are not concerned with the protection or application of
governmental interest but rather are primarily concerned with the
reconciliation of private interests and expectation.316 In today’s global
economy, there is a growing requirement for a reasonable amount of certainty
and predictability in order to promote free and efficient trade internationally.317
And it has been believed that certainty and predictability in business dealings
can be “best served by party autonomy.”318 As we have seen, the trend in
international contracts is to allow the parties to choose the governing law as
they wish without imposing any relation requirement.
309 See Lorenzen, supra note 3, at 574.

310 See Juenger Letter, supra note 237, at 449.
311 See id.
312 See REESE & ROSENBERG, supra note 1, at 577.
313 Baxter, supra note 307, at 113.
314 CASTEL, supra note 91, at 173.
315 See Reese, supra note 5, at 697; see also CASTEL, supra note 91, at 173; P.E. NYGH, CONFLICT OF
LAWS IN AUSTRALIA 28 (5th ed. 1999); see generally Mexico City Convention, supra note 258; Hague
Convention, supra note 59; Rome Convention, supra note 255.
317 See Ingrim, supra note 7, at 664.
In the United States, although party autonomy has a “long pedigree,”319 and
despite the prevailing view among scholars “to treat party autonomy as a rule
of choice,”320 the application of party autonomy has been encountering
difficulty or resistance that rests with “the understanding of the basis for party
autonomy.”321 On the one hand, there is a requirement that certain relations
between the chosen law and the parties of the underlying transactions be
presented in order for such law to be applied. As a general pattern, it is hard to
find any U.S. case that upholds a choice of law clause selecting a law with
little or no connection to the dispute.322
On the other hand, as noted before, the determination of choice of law in
U.S. courts is closely interwoven with the protection of governmental interests
and advancement of the relevant policies of the concerned states.323 The courts
often are asked to consider both the relevant policies of the forum and the
relevant policies of other interested states.324 In many cases, the parties’
intention is not given “decisive effect” with regard to the choice of governing
law,325 and the parties’ choice has to yield to the government interests and
policies.326
The resistance in the United States undermining party autonomy derives
from concerns about granting freedom to the parties in their choice of law.327
There are three major concerns that need to be further addressed, not only
because these concerns adversely affect contractual choice of law, but also
because the concerns are actually either unnecessary or are misconceptions.
Some of these concerns, to a certain extent, constitute the theoretical basis of
the interest-oriented and connection-focused contractual choice of law
approaches.
319 Appendix D: Letter from Larry Kramer to Harry C. Sigman, Esq. (Aug. 29, 1994), 28 VAND. J.
TRANSNAT’L L. 475, 479 (1995) [hereinafter Kramer Letter].
321 Id. at 436.
322 See id.
323 See supra Part II.B.
324 See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 (1988).
325 In Haag v. Barnes, the court held that “even if the parties’ intention and the place of the making of the
contract are not given decisive effect, they are nevertheless to be given heavy weight.” 175 N.E.2d 441, 444
(N.Y. 1961).
326 Some critics opposing party autonomy suggested that the autonomy rule be abandoned in contract
conflicts of law; they argued that the autonomy failed to serve any of the traditional values of conflicts of law.
See Bauerfeld, supra note 6, at 1691.
327 See id. at 1660.
The first concern is the legislative function of the parties. Some have
argued that to give the parties the power to select governing law would be
tantamount to allowing the parties to assume the function of the legislature.328
This argument shaped the original Restatement in which party autonomy was
rejected because its reporter believed that party autonomy in fact made “a
legislative body of any two persons who choose to get together and
contract,”329 and that to have the parties “choose a law for themselves by
which they should be governed is not a natural notion in a law based like ours
on the complete jurisdiction of the territorial sovereign.”330
The basic view of the legislative function argument is that party autonomy
enables the parties to contract out of a system of law that would otherwise
apply and thus places the parties above the legislature of that system.331 This
view, though vigorous, has been criticized as falling “wide of the mark.”332 As
it has been pointed out, “[i]f parties are permitted to choose the law to govern
the validity of the contract, it is not because they are legislators but simply
because the forum has adopted a choice of law rule which provides that the law
chosen by the parties shall be applied.”333 In other words, in selecting
governing law, the parties exercise the choice prescribed by the choice of law
rule, and no party legislation is involved.334
Although the legislative function argument does not have majority support
in the modern fight over conflict of laws in the United States, its influence still
exists. Some remain worried about the appropriateness of party autonomy
because they believe that “the interests of the parties are subordinated to the
state’s desire to promote whatever policies are reflected in its laws restricting
party autonomy.”335 Some further believe that it is the courts’ business to
make a choice of law, and “[o]ne way to make this choice is to delegate it to
the parties.”336 Thus, party autonomy is seemingly the power delegated to the
parties by the courts.
328 See BEALE, supra note 140, at 1079.

329 Id. at 1079–80.
330 See Joseph Beale, What Law Governs the Validity of a Contract, 23 HARV. L. REV. 1, 7 (1909).
331 See P. M. NORTH & J. J. FAWCETT, CHESHIRE & NORTH’S PRIVATE INTERNATIONAL LAW 479 (12th ed.
1992).
333 See id.
334 See Note, supra note 4, at 572.
335 See Kramer Letter, supra note 319, at 457.
336 See id. at 458.
The second concern involves the question of federalism. Some opponents

of party autonomy have tried to diminish the autonomy rule with federalist
notions of state legislative jurisdiction. From their position, “[i]t is not so
much a question of whether or not the parties inherently have the power to help
shape legislative jurisdiction by private contract, . . . but rather whether it is
proper as a matter of federalism to allow the parties’ intentions to shape
legislative jurisdiction.”337 They suggest that party autonomy be abandoned
because it fails to serve any of the traditional values of conflict of laws.338
The federalism argument is primarily attentive to state legislative power.
In this sense, this argument may be deemed as a different version of the
legislative function argument because it is argued that “[i]f contract choice-of-
law rules are viewed as setting the parameters of the states’ legislative power
to affect a contractual relationship, those rules may be analogized to the rules
that determine judicial jurisdiction.”339 Further, some argue that because party
autonomy is based entirely upon the specific intent of the parties, it fails as a
proper basis for the determination of a state’s legislative power and therefore is
inconsistent with federalism.340
The argument that attempts to square party autonomy with federalism is
fallacious because it clearly states the choice of law issue from the perspective
of the power of the state legislature rather than from the perspective of the
parties’ freedom of contract. This argument considers the parties’ intent
pertaining to the choice of law to be not that a specific law governs but that
their contract is generally binding.341 But in fact, the parties’ intention as to
which law will govern their contract is not just a “binding” issue, but rather it
affects all consequences the parties are going to face under the contract.342
Thus predictability is actually more related to the realization of the parties’
expectation than to the advancement of relevant state policies.
On the other hand, legislative jurisdiction involves the “authority [of a
legislative body] to enact laws and to conduct all businesses related to that
337 See Bauerfeld, supra note 6, at 1664.

338 The traditional values are said to include: (1) predictability; (2) advancement of the relevant policies of
concerned states; (3) advancement of the basic policies underlying the field of law; and (4) simplicity. See id.
at 1668.
339 See id. at 1667.
340 See id. at 1666–67.
341 See id. at 1666; see also WEINTRAUB, supra note 25, at 449.
342 See id.
authority.”343 To adopt party autonomy in a state is an exercise of that power

and function. Once the party autonomy doctrine is set, the application of the
rule as such has little or nothing to do with the shaping of the state’s legislative
jurisdiction.344 Put differently, if the party autonomy doctrine is not legally
recognized in certain jurisdiction, the parties would not be able to make a
choice.345
The third concern is the constitutionality of the party autonomy doctrine.
The key issue here is whether the parties must choose a law that has a
connection with the transaction. Many insist that there is a constitutional
mandate that requires a reasonable connection for purposes of application of
law because it will help minimize, if not eliminate, the danger that “the choice
of that law is ‘arbitrary’ or ‘fundamentally unfair.’”346 For example, Title 14,
the New York statute allowing a contractual choice of New York law even in
the absence of a reasonable relationship between New York and the contract,
was criticized as having violated the Full Faith and Credit clause of the U.S.
Constitution.347 The statute was said to ignore a conflict of laws value in
recognizing the important legislative policies of interested foreign
jurisdictions.348
The constitutionality argument is in great part based on the U.S. Supreme
Court’s ruling in Allstate Insurance Co. v. Hague.349 In Allstate, a newly
settled Minnesota resident, whose husband was killed in Wisconsin in a car
accident, brought a lawsuit in Minnesota against the insurance company,
seeking to “stack” uninsured motorist coverage.350 The insurance policy was
issued in Wisconsin, which covered the vehicle owned by the husband, a
Wisconsin resident.351 Minnesota law allowed stacking, but it was prohibited
under Wisconsin law.352 The issue was whether Minnesota law or Wisconsin
law would apply in this situation.353 The lower courts entered judgment for the
343 BLACK’S LAW DICTIONARY 869 (8th ed. 2004).

344 See Bauerfeld, supra note 6, at 1662.
345 See id. at 1662–64.
346 Greenstein, supra note 27, at 1166 (quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 312–13 (1980)).
347 See Rashkover, supra note 224, at 246.
348 See id.
349 449 U.S. 302 (1980).
350 See id. at 302.
351 See id.
352 See id.
353 See id.
plaintiff, and the insurer appealed.354 The Minnesota Supreme Court

confirmed, and the U.S. Supreme Court granted certiorari.355
In determining whether the Minnesota Supreme Court’s choice of its own
substantive law exceeded federal constitutional limitations,356 the Supreme
Court departed from its judicial abstention approach. It necessarily revived the
matter of constitutional limitations on choice of law357 and established a
contact requirement for the application of state law. Under the Allstate
decision, “for a State’s substantive law to be selected in a constitutionally
permissible manner, that State must have a significant contact or significant
aggregation of contacts, creating state interests, such that the choice of its law
is neither arbitrary nor fundamentally unfair.”358
Some argue that there is very good reason to worry about the
constitutionality of contractual choice of law without reasonable connection.359
The main concern is that the law chosen may not satisfy the Allstate test of
“significant contact or significant aggregation of contacts” under which a court
must examine both the forum state’s interests and the legislative policies of
foreign states.360 Thus, in order not to exceed constitutional boundaries, it is
essential that the legislation upholding party autonomy in choice of law
furthers the interests that would best meet constitutional requirements.361 For
example, section 5-1401 of the New York General Obligations Law allows the
parties to a commercial contract involving at least $250,000 to select New
York law as governing law without regard to whether the underlying
transaction is reasonably related to the state of New York.362 However, federal
courts continue to require an adequate relationship between a contract and New
York before honoring a choice of New York law provision as valid and
allowing New York law to govern the contract.363
354 See id.

355 See id.
356 See id. at 307.
357 See Robert A. Sedler, Constitutional Limitations on Choice of Law: The Perspective of Constitutional
Generalism, 10 HOFSTRA L. REV. 59, 67–68 (1981).

358 Allstate, 499 U.S. at 312–13.
359 See Greenstein, supra note 27, at 1173.
360 Id.
361 See id.
362 See Thomas P. Hanley, Jr., Enforcing New York Governing Law Clauses in Contracts, N.Y.L.J., Jan.
18, 2001, at 1.
363 See id.
It is true that the Allstate test requires the forum to base the choice of law
on contacts or interests.364 However, the very purpose of the Allstate decision
focused on the limitations on the state’s choice of law rather than on the
parties’ choice of law.365 The “modest check on state power is mandated by
the Due Process Clause of the Fourteenth Amendment and the Full Faith and
Credit Clause of Art. IV, section 1.”366 One reason stated in Allstate for the
constitutional control of choice of law is fairness to the parties.367 The
principle has been that “the states are forbidden to apply their own law when to
do so would constitute unfair surprise.”368 The fact is that “[i]f a choice of law
does not outrageously surprise one of the parties, it will rarely be held
unconstitutional.”369
Therefore, since the Allstate decision imposes limitations on the power of
state courts to make choice-of-law decisions, it seems farfetched to apply the
Allstate test to contractual choice of law when the parties voluntarily decide to
subject their transaction to a particular system of law. To be more explicit, the
unfairness or unfair surprise arguments are irrelevant in contractual choice of
law unless the choice of law agreement was not reached on a voluntary basis.
In this respect, the constitutional concern as to contractual choice of law is not
persuasive.
The U.S. Constitution sets forth a framework under which each state has
sovereignty,370 yet the federal government that holds the country together is
protected.371 Therefore, a state, when exercising its power, is bound within the
four corners of the Constitution.372 A legitimate question is whether it is
appropriate or necessary to extend such limits to the domain of private parties
in the area of contracts. Whatever the answer may be, it is highly doubtful that
it would be impermissible under the Constitution for the parties to subject
themselves by contract to whatever state law they see fit.
Another important question is whether state policies and interests are
promoted by granting the contractual parties the freedom to select a neutral law
364 See Sedler, supra note 357, at 72–73.

365 See Willis L. M. Reese, The Hague Case: An Opportunity Lost, 10 HOFSTRA L. REV. 195, 201 (1981).
366 Allstate Ins. Co. v. Hague, 449 U.S. 302, 332 (1980) (Powell, J., dissenting).
368 James Martin, The Constitution and Legislative Jurisdiction, 10 HOFSTRA L. REV. 133, 133–34 (1981).
369 Russell J. Weintraub, Who’s Afraid of Constitutional Limitations on Choice of Law?, 10 HOFSTRA L.
REV. 17, 34 (1981).

370 See CHARLES ABERNATHY, LAW IN THE UNITED STATES: CASES AND MATERIALS 42 (1995).
371 See id.
372 See id.
as governing law for their contract. The question is relevant because it is

argued that policy-based jurisprudence is the legal practice in the United
States.373 Thus, the balance between the need for party autonomy and the
protection of state policies and interests is always an issue. A possible cause of
confusion is the fear that the enhancement of party autonomy will downplay
the role of state policies and interests.
This fear overlooks the fact that party autonomy would serve state policies
and interests because allowing choice of law by the parties would help
facilitate business transactions in a more stable and predictable way, which
should be sought by every state to encourage interstate and international
commerce. Moreover, to permit the parties to choose the law of a disinterested
or neutral state does not necessarily mean that the relevant state policy or
interest will be harmed. Likewise, to impose a “reasonable relation”
requirement on the parties’ choice of the law does not logically implicate that
the relevant state policy or interest will be advanced.
CONCLUSION
Party autonomy is an internationally accepted principle in the area of

choice of law. Given that choice-of-law clauses have become extremely
popular in international business transactions, including both large commercial
contracts and smaller scale consumer contracts,374 it is important that the actors
in international commerce have the security of knowing the possible legal
consequences of their commercial activities in a certain and predicable way.
Allowing parties to specify the governing law through an agreement under
party autonomy will definitely help reach that goal.
From an international perspective, the main issue concerning the
contractual choice of law is that the parties may select the law to govern their
contract without bothering to consider the connections between the law and the
transactions. As a matter of fact, in many cases, the parties may have to end up
selecting a “neutral law” in order to close the deal because neither party feels
comfortable with the application of the law of the country of the other party. It
has been argued that it seems “parochial and counterproductive to deny parties
373 See Kramer Letter, supra note 319, at 480.

374 See LEA BRILMAYER & JACK GOLDSMITH, CONFLICT OF LAWS, CASES AND MATERIALS 289 (5th ed.
2002).
access to a system of rules without which they might not otherwise be able to
conclude their negotiations.”375
The connection requirements as well as the government interest oriented
doctrines that still dominate the choice of law in the United States are clearly
not in line with international practice. It is not surprising to see that many of
the choice-of-law doctrines developed in the United States are not applied
internationally. U.S. manufacturers, distributors, importers, exporters, and
traders seeking commercial predictability likely would not support models
based on statutory law or case law from “interest analysis” jurisdictions in the
United States.376
Therefore, in order to better fit with international standards, it is imperative
that the contractual choice of law in the United States be rethought and
repositioned to link contractual choice of law more to the parties’ expectations
than to governmental policies and interests. It has been suggested that because
the expansion of party autonomy in choice of law both promotes individual
welfare and pressures legislatures to enact more efficient law, the choice-of-
law rules should be designed to maximize individual welfare rather than state
interest.377
This suggestion is not to say that government policies and interests are not
important. On the contrary, government policies and interests should be
protected during the application of law. However, the protection of the
government policies and interests could be achieved through the protective
devises such as public policy exceptions and the mandatory rule mandate, both
of which have the direct effect of excluding the application of the law chosen
by the parties for the sake of government policies and interests.
In conclusion, there is no need to insist on setting “reasonable relation” as a
general requirement for contractual choice of law. In this regard, U.C.C.
section 1-301 has made great progress by removing the requirement of
“reasonable relation” for certain international transactions. However, it should
have gone further to align itself more fully with settled international
commercial practice.378

376 Burman, supra note 271, at 378.
377 See Erin A. O’Hara & Larry E. Ribstein, From Politics to Efficiency in Choice of Law, 67 U. CHI. L.
REV. 1151, 1153 (2000).

378 Juenger Letter, supra note 237, at 447.

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ZHANG GALLEYS.

FINAL 3/29/2007 10:59:35 AM

PARTY AUTONOMY AND BEYOND: AN INTERNATIONAL

Party autonomy is a choice of law doctrine that permits parties to choose

Lipstein ed., 1971).

679, 697 (1963).

512 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

6 Richard J. Bauerfeld, Effectiveness of Choice-of-Law Clauses in Contract Conflicts of Law: Party

Autonomy or Objective Determination?, 82 COLUM. L. REV. 1659, 1660 (1982).

Dream, A Practitioner’s Nightmare, 28 CREIGHTON L. REV. 663, 664–65 (1995).

2006] PARTY AUTONOMY AND BEYOND 513

QUESTIONS vii-viii (6th ed. 2001).

L. 421, 422 (1995).

514 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

(c) Except as otherwise provided in this section:

governing law. Id.

2006] PARTY AUTONOMY AND BEYOND 515

believe that since commerce occurs in a “global village,”23 parties should be

23 Borchers, supra note 15, at 442.

73 TEMP. L. REV. 1159, 1172 (2000).

516 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

embodies the interest of relevant states or countries, and therefore no

I. PARTY AUTONOMY: AN OLD CONCEPT WITH EVOLVING SUBSTANCES

As noted, party autonomy as a choice of law doctrine is not new. The

29 Lando, supra note 2, at 6.

2006] PARTY AUTONOMY AND BEYOND 517

reprinted in GENE R. SHREVE, A CONFLICT-OF-LAWS ANTHOLOGY 7, 8–10 (1997).

518 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

At the time of Dumoulin, the party autonomy doctrine seemed to have at

2006] PARTY AUTONOMY AND BEYOND 519

In modern conflict of laws theory, party autonomy doctrine bears a great

Approach, 18 COLUM. J. TRANSNAT’L L. 323, 323 (1980).

520 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

60 See, e.g., Gruson, supra note 58, at 326.

2006] PARTY AUTONOMY AND BEYOND 521

522 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

country75 or that renvoi should be avoided completely by substituting choice of

Griswold, supra note 70, at 1188–93.

2006] PARTY AUTONOMY AND BEYOND 523

implication of party autonomy was the power of parties to a contract to choose

BUSINESS TRANSACTIONS: A PROBLEM ORIENTED COURSEBOOK 105 (4th ed. 1999).

524 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

97 (4th ed. 2002).

2006] PARTY AUTONOMY AND BEYOND 525

REV. 969, 973 (1956).

LAWS § 187 cmt. g (1988).

526 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

civil status of the contracting parties.105 Therefore, the rule is governed by

105 CASTEL, supra note 91, at 197.

property by the parties specified in a previous contractual choice of law agreement.

2006] PARTY AUTONOMY AND BEYOND 527

choice should be limited to the laws of the place of performance. In general, a

528 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

REV. 931, 935 (2006).

2006] PARTY AUTONOMY AND BEYOND 529

II. PARTY AUTONOMY IN AMERICAN CHOICE OF LAW: A MESS

127 Id. art. 5(2).

530 EMORY INTERNATIONAL LAW REVIEW [Vol. 20

136 Id. at 136.

2006] PARTY AUTONOMY AND BEYOND 531

142 Id. at 1079–80.

531, 532 (1960).

contract binding took place.” Id.