In a recent New York decision, a key reminder has been issued to legal professionals involved in contract drafting: remain vigilant to the role public policy plays when enforcing choice-of-law provisions. The case underlines the need for clarity when determining how disputes will be governed by the law.
Every day, attorneys act as advisors to parties negotiating and drafting contracts. Among the many aspects these professionals have to consider, choice-of-law provisions often fall to their responsibility. Deciding which state’s law will govern a dispute might seem irrelevant in theory, with the assumption that the intent of the sophisticated parties involved in negotiation should typically be facilitated by the law seeking justice and equity.
However, the significance of these provisions can hardly be overstated, especially when it comes to matters of public policy. Choice-of-law provisions have the power to determine the direction and outcome of a legal dispute, and when chosen without full consideration, can lead to unintended consequences and potential litigation.
The New York decision reaffirms that drafter needs to beware when designating governing law, as the public policy of the forum state remains an important consideration.
These principles were recently put to the test in a case handled by Lowenstein Sandler LLP. As is common, the law firm’s legal advisors were entrusted with the task of negotiating and drafting the choice-of-law provisions. This case underscores the importance of understanding the implications of these provisions and choosing the governing law wisely.
Given the complex nature of both domestic and international thoughtfully-crafted choice-of-law provisions can provide certainty to the parties and can help avoid costly and protracted litigation. Hence, the latest New York decision serves as an important reminder for legal practitioners to remember, public policy continues to play a critical role in enforcing choice-of-law provisions.
Please find further details and discussion points on this matter in the related JDSupra article.