A Short History of the Choice-of-Law Clause

Abstract

In the field of conflict of laws, private actors are generally granted the power to choose the law to govern their contracts. This is the doctrine of party autonomy. In recent years, this doctrine has been the subject of several excellent histories that draw upon judicial opinions, scholarly writings, and legislative enactments to chronicle changing attitudes towards party autonomy over time. A moment’s reflection, however, reveals that judges, scholars, and legislatures are not the most important actors in this particular story. The true protagonists are the contracting parties who write choice-of-law clauses into their agreements, without which there would be no need for any doctrine of party autonomy. These drafters and their creations are, however, almost entirely absent from the existing histories.

This Article seeks to remedy this deficit. It provides answers to basic questions about choice-of-law clauses for which the existing literature offers no ready answers. When did they first appear? Have they always been popular? Has the manner in which they are drafted changed over time? It describes how these provisions were first used in the years immediately after the Civil War by companies operating in a small number of industries. It shows how they slowly found their way into a growing number of agreements in the early twentieth century before enjoying a breakthrough moment in the early 1960s. And it recounts how contract drafters in the late twentieth century began experimenting with new language that simultaneously expanded the reach of these clauses and prompted the courts to devise new interpretive rules.

This historical account, while interesting in its own right, also has broader implications. First, it underscores the extent to which contract drafters do not always function as rational actors. In some cases, these drafters added language to their clauses that was arguably unnecessary. In others, they declined to add language that would have advanced their interests more effectively. Second, the Article argues that the pattern of contractual change over time in the context of choice-of-law clauses is different than the pattern observed with respect to other types of contractual provisions. This finding suggests the need for new models of contract innovation.

Keywords: party autonomy; choice-of-law; conflict of laws; contracts; contract interpretation

JEL Classification: N81; N82