Choice of Law provisions often exist in contracts where companies do business in more than one state. This is important because each state has its own set of laws, which can be very different from each other. These laws often control who one can sue, how long one can wait before you sue, what one can sue for, and what one may receive if one wins a lawsuit. Having the choice of law means that a person can decide which state or federal law she would like to use; however, there must be a connection between the state and the company being sued. Many times, companies will make that choice for the consumer, to the advantage of the company, by including choice of law provisions that limit the laws that can be used in a lawsuit. Usually, this means that consumers are stuck using laws that are better for the seller rather than the buyer, and that the buyers are less likely to win lawsuits or collect all of the money that they might be owed. Choice of law provisions can be found in a wide variety of contracts, including employment contracts and loan agreements.
Example: Eve bought a camera from a store in Texas when visiting her brother. She lives in Florida. The store is part of a national chain that is based in Delaware. She also bought a three-year warranty in case the camera broke. A week later, the camera’s battery exploded and burned Eve’s hand. Eve wants to sue using Texas law because Texas law is better for buyers (which means she would be more likely to win the lawsuit). The warranty agreement had a choice of law provision that only allows Eve to sue under Delaware law, which does not allow people to sue for injuries caused by cameras.* Because of this, Eve cannot sue the store for the money that she needs to pay for her hospital bills.
* This is only an example and not a real law.
Sample – DVD Player Purchase Agreement:
These Terms of Service shall be construed and enforced in accordance with the laws of the State of California without regard to the choice of law principles thereof.