Which state's law applies

Where a dispute touches several states, the forum applies its own choice-of-law rules to determine the governing substantive law.

Contractual choice. Generally honoured where the chosen state has a substantial relationship to the parties or the transaction, or another reasonable basis exists, and application would not contravene a fundamental policy of a state with a materially greater interest.

Absent a clause. Most states apply a most significant relationship analysis weighing the place of contracting, negotiation, performance, the location of the subject matter, and the parties’ domiciles, against general policy factors. Others retain older rules — the place of contracting for contract questions and the place of injury for torts.

Depeçage. Different issues in the same case may be governed by different states’ law, so the analysis is issue by issue rather than case by case.

Scope of a clause. A clause selecting the law governing the agreement may not reach related tort claims unless drafted to cover disputes arising out of or relating to the agreement.

Statutes of limitation are procedural in traditional analysis and governed by the forum, subject to borrowing statutes. Contractual choice of law does not always carry the limitation period with it, and clauses should say whether it does.

Public policy overrides remain, notably for restrictive covenants, consumer protections and wage statutes.