Choice of Law Provisions
More and more contracts contain mandatory arbitration clauses and also what are called choice-of-law clauses. A choice of law clause may seem very innocent to the consumer but they can be critical. What the choice-of-law clause does is it attempts to dictate what state law is going to govern any controversy between the consumer or the plaintiff and the corporate entity that is the potential defendant. Although we live in a United States we also live in 50 different states. All of those states have dramatically different laws when it comes to such issues as product liability and ability to pursue class action claims.
Many courts over the last few years have become vigilant of these choice-of-law clauses that appear in consumer contracts. These types of provisions may even appear in warranty provisioons with products that are purchased. That is, after a product is purchased there is typically a warranty card that needs to be sent in with a warranty agreement. That warranty agreement may contain a choice-of-law clause.
Many states apply a rule that is found in a well recognized treatise known as the Restatement (second) of Conflict of Laws which essentially states that even though there may be a choice-of-law provision, that provision is not going to govern in those circumstances where the chosen state has no substantial relationship to the parties or to the transaction and there is no reasonable basis for the choice of that state or where the application of the law of that state chosen in the contract would be contrary to the fundamental policy of the state where the claim is being litigated.
In spite of that principle, consumers need to be wary of any contract or agreement that contains a choice of law provision as these are typically designed to protect maufacturers/sellers and not consumers.
