1. The American
Choice-of-Law Revolution and Its Aftermath
Oregon’s propensity and
capacity to innovate have manifested themselves in many areas of the
law, including the law of conflict of laws. In the early 1960s,
Oregon, along with New York,1
took the lead in a movement that has since become known as the
American choice-of-law revolution.2
In Lilienthal v. Kaufman,3
the Oregon Supreme Court abandoned the traditional choice-of-law rule
of lex loci contractus, which required the inexorable
application of the law of the place where the contract was
made to any and all issues of contract conflicts.4
In its place, the court adopted an “approach” known as
governmental interest analysis first advocated by Professor Brainerd
Although two earlier cases had also abandoned the lex loci
contractus rule, their reasoning in those cases was hesitant and
equivocal.6Lilienthal was the first truly revolutionary case in contract
The choice-of-law revolution
caught fire in the 1970s, spread in the 1980s, and declared victory
in the 1990s, leading to the demolition of the centuries-old
choice-of-law system, at least in tort and contract conflicts. By the
end of the twentieth century, forty-one U.S. jurisdictions had
abandoned the traditional system in contract conflicts, and forty-two
jurisdictions did likewise in tort conflicts.8
However, although the revolution has changed American conflicts law
in many beneficial ways, it did not produce a new choice-of-law
system to replace the old one. Rather than offering a unified vision
for the future, the revolution offered conflicting theories, which
the courts have merged together, often adding their own variations.9
In its zeal to cleanse the system from all the vestiges of
traditional thinking, the revolution careened to the other extreme of
denouncing not only the particular rules of the First Conflicts
but also all choice-of-law rules in general.11
Rules were replaced with “approaches”: namely, flexible formulae
that do not prescribe solutions in advance, but simply enumerate the
factors to be considered in the judicial fashioning of an ad hoc
solution for each conflict. Although these factors differ from one
approach to the next, all such approaches are open-ended and call for
an individualized, ad hoc handling of each case.
For some time, these
approaches were looked upon as panacea. They were perceived as
capable of resolving all problems without the aid of rules, not even
those produced by the normal workings of precedent. At some point,
American conflicts law began looking like “a tale of a
in which “each case [was] decided as if it were unique and of first
While flexibility is preferable to uncritical rigidity, too much
flexibility can be as bad as no flexibility at all.14
Among other things, it increases litigation costs,15
wastes judicial resources,16
and raises the possibility of judicial subjectivism,17
a phenomenon aptly described as “judicial particularistic
or “impressionnisme juridique.”19
In turn, judicial subjectivism leads to dissimilar handling of
similar cases, which in turn tests the citizens’ faith in the legal
system and tends to undermine its very legitimacy.20
While conflicts law is, in
some respects, a field apart, it is not so different as to risk
ignoring these fundamental values for long. Polyphony and flexibility
are both necessary and enriching in periods of transition and
experimentation, but they should not be the ultimate destination
goals. Put another way, transitions and experimentations should not
Four decades after the revolution began, it became evident that it
had gone too far in embracing flexibility to the exclusion of all
certainty, just as the traditional system had gone too far toward
certainty to the exclusion of all flexibility. It was time for an
exit strategy that would consolidate and preserve the gains of the
revolution, curtail its excesses, and turn its victory into success.
Once again, Oregon took the
lead in recognizing the need for a new way, an exit strategy from the
anarchy of the conflicts revolution. This strategy called for a new
breed of smart, evolutionary choice-of-law rules that would preserve
the methodological accomplishments of the revolution while restoring
a proper equilibrium between certainty and flexibility. To implement
this strategy, the Oregon Law Commission,22
decided to undertake the ambitious project of drafting choice-of-law
rules for enactment by the state’s legislature.23
The first phase of this
project produced a new comprehensive statute for contract conflicts.
This statute (hereinafter referred to as the “Act”) was drafted
by the Commission in 2000, adopted by the Oregon legislature in 2001,
became effective on January 1, 2002,24
and applies to all actions filed on or after that date.25
The second phase of this project (currently under way) is the
drafting of a similar statute for tort conflicts.
This Article provides an
of the new Act in an effort to assist courts and counsel in
interpreting and applying it. The author was an active participant in
drafting the Act under the Commission’s auspices.27
He also presented the Bill to the Oregon legislature. The author
previously drafted another codification,28
which was used as the model in drafting the Oregon Act.29
Even so, however, the views expressed here are solely those of this
author and do not represent the views of the Commission or of the
After defining the terms
the Act delineates its scope of operation by stating somewhat
circularly that it “govern[s] the choice of law applicable to any
contract . . . when a choice between the laws of different states is
In other words, the Act applies when the contract at issue has such
contacts with more than one state (multistate contract) as to raise
the question of which state’s law should govern the parties’
rights and obligations (choice-of-law question). Conversely, the Act
does not apply when the contract in question does not have meaningful
contacts with more than one state (a fully-domestic or intrastate
The Act also establishes its
residual character vis-à-vis certain other Oregon statutes by
providing that it “do[es] not apply if another Oregon statute
expressly designates the law applicable to the contract.”34
This phrase contemplates statutes that contain choice-of-law rules
providing that Oregon law (and occasionally the law of another state)
governs certain contracts that have contacts with more than one
state. One finds such rules (interspersed with substantive rules) in
the Uniform Commercial Code,35
the Insurance Code,36
and many other statutes.37
These choice-of-law rules prevail over the Act, not because they are
qualitatively better or hierarchically superior, but rather because
they are more specific. They delineate the spatial reach of the
substantive rules they accompany and, as such, they deserve deference
by the drafters of more general rules such as those found in this
Act. Moreover, many of these specific choice-of-law rules are derived
from uniform laws, and any change would destroy the uniformity
accomplished this far.
The Act’s structure reflects
its judicial orientation, which is particularly apparent in the
sequence of the Act’s sections. They are arranged in a sequence
that charts a roadmap judges can easily follow.38
The operative part of the Act begins with section 81.105, which
provides that certain contracts that have the specified Oregon
contacts are governed by Oregon law, regardless of any other
Thus, when a judge encounters a contract with multistate elements,
the judge should first look at section 81.105. If the contract fits
the specifications of this section, the judge should apply Oregon
substantive law, without having to look at the other sections of the
Act, and without having to perform a choice-of-law analysis.
If the contract does not fall
within the scope of section 81.105, then the judge should inquire on
whether the contract is valid as to form (§ 81.110), capacity (§
81.112), and consent (§ 81.115). If the contract is valid, the judge
should inquire on whether the contract contains a choice-of-law
clause. If so, the judge should examine the validity and
effectiveness of the clause under sections 81.120 and 81.125.
If the contract does not
contain a choice-of-law clause, or contains one that is ineffective,
the judge should proceed to sections 81.130 and 81.135. If the
contract is one of those for which section 81.135 provides
presumptive rules, the judge should apply the law designated by the
applicable presumptive rule, unless the opposing party invokes the
escape contained in that section and demonstrates that another law
should apply under section 81.130. If section 81.135 does not provide
a presumptive rule for the particular contract, the judge will resort
to the general rule of section 81.130 and perform the choice-of-law
analysis that section prescribes.
The following discussion
follows exactly this sequence, beginning with the Act’s first
operative provision, section 81.105.
IV. Contracts Governed by
Oregon Law (O.R.S. Section 81.105)
Section 81.105 of the Act
contains four “unilateral” rules40
mandating the application of Oregon law to four types of contracts
that have certain specified connections with the state of Oregon,
(1) contracts for services to
be rendered, or goods to be delivered, in Oregon if the State of
Oregon or one of its agencies or subdivisions is a party;41
(2) contracts for construction
work to be performed primarily in Oregon;42
(3) employment contracts for
services to be rendered primarily in Oregon by Oregon residents;43
(4) consumer contracts44
involving Oregon consumers acting in Oregon.45
As the above list indicates,
the Oregon connections are that (a) all four of these contacts are to
be performed in Oregon, and (b) in three of them, at least one party
is an Oregon party. These connections are significant and they would
probably lead to the choice of Oregon law regardless of which modern
choice-of-law methodology one might follow. For this reason, and in
the interest of judicial economy, section 81.105 exempts these
contracts from a judicial choice-of-law analysis and directly
subjects them to Oregon law. As its opening phrase states, section
81.105 prevails over all the other sections of this Act: Oregon law
applies “notwithstanding any other provision [in this Act].”46
This means, inter alia, that Oregon law applies to any and all
issues in these contracts47
and that a contractual choice of another state’s law may not
displace the application of Oregon law.48
When one of the parties is an
Oregon party and Oregon law is more protective of that party than the
law of the other involved state or states, then the application of
Oregon law under section 81.105 can be based on two independent but
(1) Oregon’s interests in regulating a contract that is performed
in its territory; and (2) Oregon’s interest in protecting the
Oregon party. The latter interest is obvious, for example, when, in a
consumer contract that meets the requirements of section 81.1054(a),
Oregon law is more protective of the Oregon consumer than the law of
the merchant’s home state. In such a case, Oregon has every
interest to apply its own law, even if the contract contains a choice
of the other state’s law. In adopting precisely such a solution,
section 81.105 parallels the laws of many other states, as well as
the latest revision of the U.C.C., which provides that a choice of
law clause “may not deprive the consumer of the protection of any
rule of law . . . which both is protective of consumers and may not
be varied by agreement . . . of the State or country in which the
consumer principally resides.”50
However, when Oregon law is
less protective of the Oregon consumer or other Oregon party, then
the two above Oregon interests arguably point in opposite directions:
the interest in regulating the contract points toward Oregon law,
while the interest in protecting the Oregon party points toward
foreign law. Section 81.105 takes the position that the former
interest prevails, which means that Oregon law governs not only when
it favors, but also when it disfavors the Oregon party. This is so
even if the contract contains a choice of another state’s law.
Indeed, the Oregon drafting group specifically rejected the notion
adopted in some European codes, the Puerto Rico code, and recently
the U.C.C., of allowing consumers or employees to opt out of
non-protective local law.51
The group did accept the notion of allowing state agencies the option
of waiving the application of Oregon law by, for example, signing a
contrary choice-of-law clause.52
V. Form, Capacity, and Consent
Sections 81.110, 81.112, and
81.115 deal with questions of contractual form, capacity, and
consent, respectively. These questions do not arise as frequently
today as they did in the past because the pertinent substantive rules
of many states are now closer than ever. Nevertheless, at least
theoretically, these questions are preliminary to any other
choice-of-law questions in a contract dispute. Before proceeding
further, one needs to know whether there was a binding contract, and
in turn that depends on whether the parties followed the proper form,
whether they had contractual capacity, and whether they validly
expressed their assent to the contract.
1. Formal Validity (O.R.S.
Section 81.110 deals with the
formal validity of contracts. It establishes what is known in
conflicts literature as a “rule of validation,” i.e., a rule that
favors the validity of contracts (favor negotii) by
alternative references to whichever of the enumerated laws would
uphold the contract.53
The justification for this result-oriented rule rests on the premise
that, more often than not, the various state laws on contractual
formalities differ only in minor detail, rather than fundamental
policy. For this reason, failure to meet the technical requirements
of one state should not, without more, defeat the intent of the
parties in having a binding contract, if such a contract complies
with the form requirements of another state reasonably related to the
parties and the transaction.
The first alternative
reference is to the law chosen by the parties, and this creates a
certain circuitry or “bootstrapping.” A contract is valid as to
form if it satisfies the relevant requirements prescribed by “the
law chosen by the parties under ORS 81.120 and 81.125.”54
However, this assumes that that law was validly chosen, and this, in
turn, depends in part on whether the choice is contained in a
contract that is formally valid under section 81.110. This apparent
“bootstrapping” is harmless because of the safeguards contained
in both section 81.120 and section 81.125. If the parties’ choice
was expressed in the manner required by section 81.120 (express, and
in some instances conspicuous) and remained within the limits
prescribed by section 81.125, then a contract that satisfies the form
requirements of the chosen law should be considered formally valid,
even if it does not satisfy the form requirements of any of the other
laws enumerated in section 81.110.55
The next three alternative
references of section 81.110 are to “the law applicable under
sections ORS 81.105, 81.130 or 81.135.”56
One should note that the reference to section 81.130 brings with it
the individualized issue-by-issue analysis that section prescribes.
Consequently, it is possible that, in employing the flexible analysis
of section 81.130, a court may conclude, after considering all the
factors listed in that provision, that the “most appropriate” law
for the issue of form is the law of state X, even though with regard
to other issues the law of state Y is the “most appropriate.”57
If so, the court should apply the law of state X to the issue of
form, whether or not that law upholds the particular form. If it does
not, and none of the other alternative references lead to a
validating law, then the contract will be invalid as to form.58
Finally, the last alternative
reference in section 81.110 is to the “law of the state from which
any party or the party’s agent has assented to the contract.”59
This resembles the rules found in other modern codifications, which
focus on the place where the parties “were” at the time of the
making of the contract.60
Section 81.110 takes a similar, but not identical position. Rather
than referring to the place where the parties “were” at the
pertinent time, section 81.110 refers more precisely to the place
where the parties “expressed their assent to the contract.” This
phrase is broad enough to encompass anything from a formal signing of
the contract, a handshake, mere silence, or any other act or omission
from which one may reasonably infer an agreement to be bound to the
contract. When the parties express their assent to the contract in
the same place, this rule will produce the same result as the old lex
loci contractus rule. When the parties express their assent from
different places, the law of either place may be used to validate the
However, section 81.110 also
recognizes that in some cases the presence of a party in a given
location may be fortuitous or it may be chosen deliberately so as to
gain certain advantages. To guard against fortuity or evasion,
section 81.110 allows the court to refuse to apply the law of a state
that, but for the presence of the party at the pertinent time, “has
no other connection to the parties or the transaction.”61
2. Capacity (O.R.S. Section
Section 81.112 applies to the
issue of capacity to enter into a binding contract.62
This section refers to two potentially different sets of laws: (a)
the law of the domicile (lex domicilii) of the party whose
capacity is at issue; and (b) “the law applicable to this issue
under ORS 81.105, 81.130 or 81.135.”63
Subsection (1) of section 81.112 provides that the contract should be
upheld as to capacity if it is valid under both or either of the
above sets of laws. The fact that section 81.112 does not contain a
cross-reference to sections 81.120 or 81.125 is deliberate; it means
that issues of capacity are exempted from the scope of party
autonomy. Consequently, the problem of “bootstrapping,” which was
noted earlier with regard to form, does not arise with regard to
For the sake of simplicity,
the following discussion excludes contracts falling within sections
81.105 or 81.135 and focuses only on contracts falling within the
scope of section 81.130, the general rule. Further, for the sake of
brevity, the law that would be applicable to the issue of capacity
under section 81.130 is referred to hereafter as the lex causae.
To illustrate the operation of section 81.112, it would be helpful to
think of the following possible combinations of laws and facts:
(1) cases in which the lex
causa is the same as the lex domicilii, namely cases in which the law
applicable to the issue of capacity under section 81.130 is the law
of the domicile of a party whose capacity is at issue;
(2) cases in which the lex
causae is not the lex domicilii, but in which the two laws produce
the same result;
(3) cases in which a
contracting party is capable under the law of its domicile, but not
under the lex causae; and
(4) cases in which a party is
incapable under the law of its domicile, but capable under the lex
Cases falling within patterns
(1) and (2) do not present a choice problem, because in the first
pattern there is only one option, and in the second pattern the two
options produce the same result.64
Cases falling within patterns
(3) or (4) do present a choice problem, which subsection (1) of
section 81.112 resolves in a result-oriented fashion by authorizing
the application of whichever of the two laws would uphold the
contract. In cases falling within pattern (3), subsection (1)
functions as a veritable rule of validation, and is subject to no
However, an exception is
available with regard to cases falling within pattern (4). Subsection
(2) of section 81.112 applies to these latter cases and provides the
possibility of relief to the party who is incapable under the law of
his domicile. That party can have the contract declared invalid if
she proves that the other party “knew or should have known” of
The famous Oregon case
Lilienthal v. Kaufman,66
which this provision overrules, is a perfect scenario through which
to explain the operation of this provision. Lilienthal
involved a loan contract made in California between Mr. Lilienthal, a
California domiciliary, and Mr. Kaufman, an Oregon domiciliary. The
contract was valid under California law but invalid under Oregon law
because Mr. Kaufman had been declared a spendthrift in Oregon, thus
making his contracts voidable at the behest of his guardian. The
Oregon Supreme Court found a true conflict between Oregon and
California law and applied Oregon law, invalidating the contract.
Under section 81.112, one
should not automatically apply Oregon law, either because Oregon is
the forum, or because it is the domicile of the incapable party.67
Rather, one should ask whether, under all the factors of section
81.130, California law would be applicable to the issue of capacity.
For the purposes of this discussion, and for reasons explained in
one should assume that California law would be applicable to this
issue under section 81.130. Because California law would consider Mr.
Kaufman capable of contracting, then under subsection (1) of Section
81.112, the contract should be upheld as to capacity.
However, subsection (2) of
section 81.112 would provide Mr. Kaufman with an additional defense.
If he could prove that the other party, Mr. Lilienthal, knew or
should have known of Mr. Kaufman’s incapacity under Oregon law,
then the consequences of incapacity would be determined by Oregon
law, which would hold the contract voidable. Under the facts of
Lilienthal, Mr. Lilienthal could not be charged with such
actual or imputed knowledge. Although Lilienthal knew that Kaufman
was an Oregon domiciliary, Lilienthal had no reason to suspect that
Oregon, or for that matter any state of the United States, would have
such an obscure rule that considered an adult person without any
visible physical or mental infirmities incapable of contracting.
Hence, Lilienthal had every reason to expect the contract would be
As the above discussion
illustrates, section 81.112 aspires to attain an appropriate
equilibrium between two often competing policies: (1) protecting the
security of transactions and contractual expectations; and (2)
protecting parties whom the substantive law considers to be in need
of protection. The first policy is best served by a choice-of-law
rule that favors validation. The second policy is best served by an
unqualified application of the law of the incapable party’s
The fact that subsection (1)
of section 81.112 authorizes the application of whichever of the two
laws (the lex domicilii or the lex causae) validates
the contract may give the impression of unduly favoring the first
policy at the expense of the second. However, as explained above,
this rule is unqualified only in cases falling within pattern (3),
above, namely cases in which the contracting party is capable
of contracting under the law of his domicile. In such cases, the tilt
towards validation is easily defensible. A rule imposing an
incapacity is a collective societal judgment about a person’s
maturity, soundness of mind, or need of protection. It reflects an a
priori legislative determination that the need to protect the
incapable overrides the general policy of promoting the security of
transactions. When the society in which a person lives has determined
that he does not need any protection, there is no persuasive reason
to invoke the protection provided for other persons by the law of
another state on his behalf (even if that law would otherwise be the
lex causae) and thereby defeat the policy of promoting
security of transactions.69
On the other hand, in cases
falling within pattern (4) (cases in which the contracting party is
incapable under the law of her domicile but capable under the lex
causae), the validation rule of subsection (1) is qualified by
the exception of subsection (2). Although this exception would not
have helped Mr. Kaufman, it would help other more deserving parties
falling within this category, especially since it articulates an
objective standard (“should have known”). Thus, subsection (2) of
section 81.112 provides a fact-sensitive corrective to the validation
tilt of subsection (1).
Consent (O.R.S. Section 81.115)
Section 81.115 applies to
issues of “consent” to the contract. This encompasses both the
existence and the validity of a party’s consent, that is, whether a
party has signified its assent to be bound by the contract, but also
whether such signification reflects that party’s own genuine
volition. Thus, the scope of section 81.115 encompasses rules
concerning offer and acceptance, vices of consent such as fraud,
duress, or error, and the consequences of such vices of consent.
Subsection (1) of section
81.115 provides that the issues of whether a party expressed his
consent to the contract and whether such consent was free of vices
are determined under the law applicable to those issues under
sections 81.105, 81.130 or 81.135, whichever section is applicable to
the particular contract.70
From this provision flow two corollaries, one affirmative and one
negative. The affirmative corollary is that these are distinct issues
that call for separate analysis under section 81.130. The negative
corollary is that these issues, like the issues of capacity, are not
governed by sections 81.120 and 81.125, and thus they do not fall
within the scope of party autonomy. Consequently, the problem of
“bootstrapping” does not arise with regard to these issues.
Subsection (2) of section
81.115 applies to consumer contracts and employment contracts. It
enables consumers or employees to invoke the protection of the
consent laws of their home state, and thus to avoid a contract that
would be binding under subsection (1) if their assent to the contract
was obtained in their home state, or if their conduct leading to the
contract was primarily confined to that state.
VI. Party Autonomy
A. The Principle
Section 81.120 enunciates the
general principle of party autonomy and defines its scope, mode of
expression, and other modalities. Party autonomy is a term of art
which, in the multistate context, stands for the notion that, within
certain limits, the legal system should enforce agreements by which
contracting parties designate the law that will govern their rights
and obligations under the contract.
This principle is almost as
ancient as conflicts law itself,71
and is perhaps the most widely accepted [conflicts] rule of our
Even so, American conflicts law was rather slow in sanctioning this
principle. In 1825, the US Supreme Court referred in passing to a
principle of “universal law” that a contract is governed by the
law “with a view to which it was made,”73
thus recognizing the notion of an implied choice of law by the
parties. Although this recognition should have made recognition of an
express choice of law even easier, cases involving such a
choice did not begin to appear until the end of the nineteenth
In the 1930s, the drafters of the First Restatement rejected party
autonomy on the ground that it amounted to a license for private
although by that time party autonomy was taking roots in both
transactional and judicial practice. Recognizing this reality, the
Restatement (Second) formally sanctioned and codified the principle
of party autonomy,76
thus bringing American law in accord with most other western legal
systems. Today, choice-of-law clauses have become commonplace in
Given the universality of this
principle, there is no need to defend it here.78
Instead, the following discussion focuses on the specifics of the
Oregon version of this principle.
1. Scope of Party Autonomy
a. Specific Exemptions
Through its introductory
except clause, subsection (1) of section 81.120 expressly exempts
certain contracts and certain issues from the parties’ power to
pre-select the applicable law.
The first exception
encompasses those contracts that, under section 81.105, are governed
by Oregon law because they have the specified contacts with Oregon.
The second exemption applies
to all contracts and involves issues of form, capacity, and consent.79
As discussed earlier, these issues are governed by the law designated
by sections 81.110, 81.112, and 81.115, respectively. By excluding
these issues from the scope of party autonomy, section 81.120 avoids
the bootstrapping phenomenon. When, under the normally applicable
law, a contract is invalid as to form, capacity, or consent, the
invalidity also affects any choice-of-law clause contained in the
contract. A party who lacks contractual capacity, under section
81.112, may not confer on itself capacity simply by choosing another
law. Likewise, a party who did not validly consent to a contract,
under section 81.115, should not be bound by it, even if the contract
purports to choose another law.
b. Implied Exceptions:
Subsection 1 of section 81.120
also confines party autonomy to the parties’ contractual
rights and duties. The use of the italicized word was deliberate: it
is intended to exclude from the scope of party autonomy
non-contractual issues, such as tort claims, unfair trade practices,
statutes of limitation, attorney fees, and prejudgment interest. It
is one thing to allow parties to jointly pre-select the law that will
govern their contractual dispute and another thing to allow them to
do so with regard to a future tort between them. The latter is a much
more serious matter, especially in contracts in which one party is
likely to be in a weak bargaining position, such as employment
contracts, consumer contracts, or insurance contracts. The protection
traditionally afforded to these parties should not be evaded through
the ostensible “choice” of another law. For these reasons, the
prevailing view in other countries has been that the parties to a
tort dispute may choose the applicable law only after the
occurrence of the tort.80
In the United States, the
question of whether a choice-of-law clause can encompass
non‑contractual issues arising from the same contractual
relationship that is the object of the clause has not received a
systematic treatment. Although the Restatement (Second) limits party
autonomy to contractual issues,81
most courts that have encountered this question assume it to be
simply one of contractual intent and examine whether the
phrasing of the clause is broad enough to include those issues. Under
this logic, a clause that explicitly encompasses “any and all
disputes between the parties” is deemed to include tort claims,
while a generic, less categorical clause is not.82
At the same time, however, courts tend to scrutinize clauses that
purport to encompass tort‑like issues much more closely than
clauses confined to purely contractual issues.83
Yet, as Sutton v. Hollywood
Video Entertainment Corporation,84
graphically illustrates, this important question should not depend on
the breadth of the contract’s language but rather on the breadth of
the parties’ contractual power.85
In Sutton, the clause in question was very broad and
all-encompassing. It provided that “any dispute arising out of or
relating in anyway to [parties’] relationship”86
would be governed by Oregon law. Sutton was a tort action for
malicious prosecution and false imprisonment against a Maryland video
store owner who had the plaintiff arrested for allegedly stealing
merchandise the previous night. In addition to being completely
innocent, the plaintiff was a customer/member of the defendant’s
video store in the sense that he had applied for and received a
membership card allowing him to rent video cassettes.
The membership agreement
contained the above quoted clause, which the defendant invoked in its
motion to dismiss the plaintiff’s tort action, or alternatively to
stay litigation and compel arbitration. As incredible as the
defendant’s argument was, it took the court three pages to conclude
that it was untenable. Plaintiff’s tort claims, said the court,
have nothing whatsoever to do with the video rental contracts.87
It is logically untenable, said the court, “that the membership
agreements were meant to cover . . . accusations of theft. Taken to
an extreme, Defendant’s reading of the arbitration clause would
require arbitration of claims such as a [defendant’s] store ceiling
falling in on customers, or a [defendant store’s] employee brutally
attacking a customer . . . who has signed a membership agreement.”88
To avoid these problems, the
new Oregon Act specifically confines party autonomy to contractual
2. Mode of Expression
To be recognized under section
81.120, the choice of law must be express or must be demonstrated
clearly from the terms of the contract.89
An express choice need not be written,90
although oral choice-of-law agreements seem to be rare in
contemporary practice, or at least in litigation.91
The balance of the quoted phrase recognizes an implied choice of law,
but not a hypothetical one. In other words, it does not suffice to
demonstrate that, if they had thought about the matter, the parties
would have chosen a particular law.92
Rather it is necessary to demonstrate an extant, albeit unexpressed,
choice of law. Moreover, the choice must be demonstrated “from the
terms of the contract.” It does not suffice if such a choice
appears “from the conduct of the parties.” The Oregon drafters
rejected a phrase to that effect which was contained in the initial
Finally, the use of the verb demonstrated,94
and the whole tenor of the phrase implies, that the existence of the
choice of law must be shown affirmatively by the party who asserts it
rather than deduced by the court on its own motion.
In the interest of certainty
but also for other reasons, section 81.120 requires an express choice
of law in two specific circumstances: (a) in standard-form contacts
drafted primarily by one party, subsection (2) requires that the
choice of law be “express and conspicuous”;95
and (2) in cases in which the parties agree on the applicable law
after the making of the initial contract or they agree to modify the
choice they made earlier, subsection (3) requires that the agreement
3. Partial, Multiple, or
Subsection (1) of 81.120
states the obvious when it provides that the parties may choose one
or more laws to govern the contract, or they may choose a law for
only part of the contract.97
For example, the parties may agree on the law that will govern the
performance of the contract and say nothing about the law that will
govern other aspects of the contract. In such a case, their choice
will be honored if it is otherwise valid, and the rest of the
contract will be governed by the law applicable to the particular
issue under the Act’s other provisions. Likewise, in a contract
that is to be performed in several states, the parties may agree that
details of performance are to be governed by the law of the state in
which the particular performance is to be rendered, while other
aspects of the contract will be governed by another law.
Both a partial choice of law
and the choice of more than one law may result in dépeçage,
namely, the application of different laws to different parts or
aspects of the contract. This is a seemingly anomalous phenomenon but
one that has long been recognized by the case law. For example, even
under the traditional system, courts applied the law of the place of
making to issues of contract validity and the law of the place of
performance to issues of performance.98
If the parties’ partial or multiple choice-of-law is otherwise
valid, there is little reason to disregard it merely because it leads
Finally, subsections (3) and
(4) of Section 81.120 restate some self-evident contract principles.
Parties are free to agree on the applicable law after the making of
the initial contract or to modify an agreement made earlier. Unless
they specify otherwise, such an agreement or modification relates
back to the initial contract or other agreement, but it may not
adversely affect the rights of third parties.100
4. The Chosen Law
In contrast to other
codifications which speak of “the law of the state”101
chosen by the parties, section 81.120(1) speaks of the “law. . .
that the parties have chosen”102
and deliberately refrains from attaching the chosen law to a state.
When this provision is read together with the definition of “law”
provided in section 81.100(1), it is clear that the parties may
choose not only the law of a state or country, but also international
law. Moreover, the accompanying Reporter’s comments state that the
parties may even choose a-national or non-state norms, such as the
Unidroit Principles of International Commercial Contracts.103
Although this statement is not expressly supported by the text of
sections 81.100 or 81.120, it is certainly within the spirit of the
principle of party autonomy as enunciated in section 81.120.104
Naturally, the choice of non-state norms will be subject to the same
limitations as the choice of state law.105
The definition of law
contained in section 81.100(1) also provides that “[e]xcept for
references to the law of Oregon, ‘law’ does not include rules
governing choice of law.” Thus, whenever the parties choose the law
of a state other than Oregon, their choice should be taken to
encompass only the “internal” law of that state, excluding its
To be sure, nothing prevents the parties from including that state’s
conflict law in their choice but, unless they expressly do so, it is
more logical to assume that they intended to avoid rather than to
invite the complexities of renvoi.107
For the same reason (i.e., the parties’ presumed, even if
rebuttable, desire to avoid the complexities of the choice-of-law
question), the contractual choice of Oregon law also must be
confined, in the absence contrary agreement, to the internal law of
Oregon. This should be so despite the above quoted phrase “[e]xcept
for references to the law of Oregon” in section 81.100(1). That
phrase is meant for all cases in which the Act itself makes a
reference to the law of Oregon, but not for cases in which the
parties agree on the application of the law of Oregon.
Finally, the contractual
choice of another state’s law should be confined to that state’s
“substantive” law and should not be taken to encompass its
procedural law. This question has particular practical relevance with
regard to statutes of limitations, which most American states
continue to characterize as procedural.108
Most cases that have considered this issue have concluded that the
choice-of-law clause did not include the chosen state’s statute of
To be sure, the distinction
between substantive and procedural rules is often not as clear as one
What should be clear, however, is that rules that are unquestionably
procedural, such as those regulating the conduct of the proceedings
in the courtroom, should be beyond the parties’ contractual power.
The parties should not be allowed, through a choice-of-law agreement,
to displace those rules that reflect the forum state’s judgment of
how to efficiently conduct litigation in its courtrooms, or how to
ascertain the truth or evaluate the evidence. Naturally, this
position should becomes less and less categorical as the “the
substantive shades off by imperceptible degrees into the
5. The Chosen State
When the parties exercise
their power to choose the law of a state, they may choose any state
or country regardless of contacts or relationships. Indeed, unlike
the corresponding provisions of other codifications and the
but consistently with new trends,113
section 81.120 of the Oregon Act does not require that the state of
the chosen law have any particular factual or legal connection to the
transaction or the parties.
The main reason for requiring
such a connection is that the choice of an unconnected law might
extend party autonomy to intra-state contracts and allow parties to
evade the otherwise applicable domestic law. However, this is not a
problem under the Oregon Act which, as noted earlier,114
applies only to multistate contracts. In any event, experience has
not shown many instances in which the parties chose the law of a
totally unrelated state.115
Moreover, the fact that party autonomy is supervised and controlled
in a substantive manner through several provisions of the Act,
especially section 81.125, obviates the need for additional,
especially geographical, controls. This is consistent with the new
trends in both the United States and elsewhere.116
For example, the 2001 Revision of Article 1 of the U.C.C. allows
choice-of-law clauses in non-consumer contracts “whether or not the
transaction bears a relation to the State [or Country] designated.”117
B. The Limitations (O.R.S.
The notion that party autonomy
must be subject to some limitations is as widely accepted as party
autonomy itself. What is lacking is a consensus on how these
limitations should be defined and how far they should go. The laws of
three potentially different states may be involved in this question:
(a) the law of the forum state (hereafter lex fori); (b) the
law chosen by the parties under section 81.120 (hereafter “chosen
law); and (c) the law that, under sections 81.130 or 81.135, would
have been applicable to the particular issue in the absence of a
valid choice of law by the parties (hereafter lex causae).
Obviously, when all three laws
coincide in the same state, there is no conflicts problem. Similarly,
there is no problem when all three states have the same or similar
law on the particular substantive issue, or on the issue of party
autonomy, so that the chosen law does not violate limitations imposed
by either the lex fori or the lex causae. However,
problems begin to emerge when the lex fori or the lex
causae (or both) restrict party autonomy more or differently than
does the chosen law. The question then is which of these three laws
should be used as the measuring stick for delineating the limits of
Section 81.125 eliminates both
the chosen law and the lex fori as candidates for this role.
With regard to the chosen law, it would be circular to say that the
parties can choose the law that defines the limits of their autonomy.
Also, the lex fori as such should not play an independent role
in policing party autonomy, unless of course the lex fori is
also the lex causae. This then leaves the lex causae as
the only law whose limitations to party autonomy are relevant under
section 81.125 in policing the parties’ choice. As said above, the
lex causae is determined through the issue-by-issue analysis
of the general rule of section 81.130, or through the presumptive
rules of section 81.135,119
whichever of the two sections is applicable to the particular
Section 81.125 articulates one
general limitation to party autonomy in clause (c) of subsection (1),
and two specific limitations in clauses (a) and (b), which in some
respects are specific manifestations of the general limitation. The
specific limitations are those imposed by the law of the state of
performance. The chosen law will not be applied to the extent its
application would: (a) require a party to perform an act that the
state of performance prohibits; or (b) prohibit a party from
performing an act that the state of performance requires. The fact
that both clauses (a) and (b) use of the verb “require” (as
opposed to permit) suggests that these limitations will come into
operation only rarely. This makes the general limitation of clause
(c) more important.
The general limitation is that
the chosen law will not be applied to the extent its application
would contravene an “established fundamental” policy of the lex
causae. The words “established” and “fundamental” were
the objects of long discussions in the drafting group, especially as
compared to the similar phrase used in section 187(2) of the Second
Conflicts Restatement, which Oregon courts followed at the time.
Indeed, this particular section of the Restatement (Second) is
followed in almost all states of the United States, including the
states that still follow the lex locus contractus rule, and
other states that have not adopted the Restatement for other issues.121
Thus, a brief comparison with this Restatement section is
Section 187(2) of the
Restatement provides that the chosen law will not be applied: (1) if
its application “would be contrary to a fundamental policy” of
the lex causae, and (2) if the state of the lex
causae has “a materially greater interest” in applying its
law to the particular issue than the state whose law the parties
Thus, under the Restatement, the party who challenges the application
of the chosen law must overcome two obstacles: that party must
demonstrate: (1) that the chosen law contravenes a “fundamental”
policy of the lex causae; and (2) that the state of the lex
causae has a “materially greater interest” in applying its
In drafting section 81.125 of
the Oregon Act, the decision was made to remove the second obstacle.
This is because, in identifying the state of the lex causae
under section 81.130, one would take account of the involved
states’ respective interests. Thus, the conclusion that state X is
the state of the lex causae often includes a conclusion that
that state has a materially greater interest. At the same time, in
identifying the lex causae under section 81.130, one should
also take account of factors other than the narrow
interests of the involved states and, in so doing, one may conclude
that the law of state X is “the most appropriate” under the
circumstances (i.e., it is the lex causae), regardless of that
The discussion then focused on
whether section 81.125 should use the qualifier “fundamental” or
some other adjective to convey the elementary notion, on which
everybody agreed, that not all differences between the chosen law and
the lex causae should be sufficient to defeat party autonomy.123
The decision was to use the term “fundamental” but, unlike the
to define the meaning of this term.125
Justice Hans Linde126
proposed that the term “fundamental” should be further qualified
with the adjective “established,” so that only an “established
fundamental” policy of the lex causae should defeat party
autonomy. Thus, section 81.125(2) defines as “fundamental” a
policy that “reflects objectives or gives effect to essential
public or societal institutions beyond the allocation of rights and
obligations of parties to a contract at issue.”127
The word “established” is not defined by it is intended to convey
the notion that only a fundamental policy that is already enunciated,
statutorily or judicially, can defeat party autonomy, as opposed to a
policy that the court invents ad hoc in the particular case in which
the choice-of-law issue arises.
The problem with this
requirement is that it is almost incompatible with judicial instinct,
at least in the American common-law tradition, and may prove unduly
restrictive. In many cases, especially when the court encounters a
novel problem, the court may appropriately conclude that a given
policy is fundamental, even though it has not, as yet, been
articulated by statute or precedent, precisely because of the novelty
of the problem. One such example is the issue of contracts for
surrogate motherhood. When American courts encountered such contracts
in the late 1980s and early 1990s, there were no statutes or
precedents expressly addressing the enforceability of such contracts,
which in turn depended on the existence of a “fundamental” policy
limiting the principle of contractual freedom. The courts did not and
could not wait for a statute or a precedent to articulate such a
policy. Rather, the courts examined relevant statutes and precedents
and extrapolated from them a general principle or policy as to
whether the legal order should enforce or not enforce those
contracts. If the courts have this power in domestic cases, there is
no reason to deny them this power in multistate cases, at least when
the “fundamental” policy invoked is a policy of the forum state.
VII. The General Rule (O.R.S.
Section 81.130 is the general
and the residual rule for the entire Act. As its introductory phrase
indicates, this rule applies “[t]o the extent that an
effective choice of law has not been made by the parties
pursuant to ORS 81.120 or 81.125.” Thus, Section 81.130 applies
(1) the parties have not
chosen the applicable law;
(2) they have chosen a law for
only part of their contract; or
(3) the attempted choice of
law is ineffective, in whole or in part, because:
(a) it is not expressed in the
mode prescribed by Section 81.120; or
(b) it exceeds the limits to
party autonomy prescribed by Section 81.125; or
(c) it suffers from a defect
of form (§ 81.110), capacity (§ 81.112) or consent (§ 81.115).
Moreover, even in cases in
which there has been no effective choice of law by the parties,
section 81.130 applies only to the extent it is not displaced by the
presumptive rules of section 81.135 or the rules of section 81.105.
The introductory paragraph of
section 81.130 enunciates the goal of the choice-of-law process for
contract conflicts, while the balance of the section prescribes the
process or method for achieving that goal, and the factors one should
consider in reaching that goal.
1. The Goal, and the
The goal is to identify the
law which, with regard to the issue in question is “the most
appropriate” for the resolution of that issue “in light of the
multistate elements of the contract.” The phrase “most
appropriate law” is likely to become the catch-phrase by which
commentators will describe the Oregon Act, without necessarily paying
attention to the specifics that follow the phrase. Some authors may
be tempted to draw comparisons with acoustically similar phrases,
such as Professor Morris’ “proper law” concept,128
and at least one author has already seen this phrase as signaling a
tilt towards “material justice.”129
There is no denying that the
choice of a catch-phrase may carry a great deal of symbolism,130
and that the choice of this particular phrase was not accidental. In
fact, the choice was made after considerable debate. However, the two
main reasons for choosing this phrase were: (1) because it is
ideologically neutral; and (2) because it is different than
comparable catch-phrases used by other codifications and
methodologies. Indeed, this phrase disassociates the Oregon Act from
Professor Currie’s interest analysis, from a significant-contacts
or significant-relationship analysis like the Second Restatement, and
from material-justice approaches, such as Leflar’s better-law
In fact, the drafting group specifically rejected a proposal to
include in section 81.130 a reference to material justice
It is no coincidence that the phrase “appropriate law” is
preceded by the phrase “in light of the multistate elements of the
contract.” This means that the objective is to find the law which,
in light of the multistate elements of the contract, is the
most appropriate for resolution of the particular issue. Thus, to use
Gerhard Kegel’s terms, the goal of the choice-of-law process under
the Oregon Act is to find “the spatially best solution”133
(“conflicts justice”), rather than “the materially best
2. The Process
The method or process for
identifying the “most appropriate” law is prescribed in the
second sentence of section 81.130, which, in its three subdivisions,
describes the three steps the decisionmaker should follow.
The first step is to identify
the potentially involved states through their contacts to the
transaction or the parties. Subdivision (1) lists the contacts likely
to be relevant, but that enumeration is clearly illustrative.
The second step is to identify
those of the involved states’ laws that are relevant to the
particular issue and then, through the resources of statutory
interpretation, to ascertain and articulate the policies embodied in
each of those laws.
The third step is to assess
and compare the relative strength of those policies and to evaluate
their pertinence to the particular issue, with the goal of selecting
the law which, in light of the multistate elements of the contract,
is “the most appropriate” for the resolution of that issue. What
is to be evaluated is not the wisdom or goodness of a state policy,
either in the abstract or in comparison with the policy of another
state, but rather the “strength and pertinence” of this policy at
the multistate level. A legislative policy that a state strongly
espouses for intra-state cases may in fact be attenuated in a
particular multistate case that has only minimal contacts with that
state. Similarly, the same policy may prove far less pertinent if the
case has sufficient contacts with that state, but not the type of
contacts that actually implicate that policy.
Before choosing between or
among the laws of the involved states, the decisionmaker should ask
how the application of each law would help accomplish or retard the
desiderata listed in clauses (a) and (b) of subdivision 3,136
such as “[m]eeting the needs and giving effect to the policies of
the interstate and international systems.” This is a much more
proactive admonition than the self-evident requirement of complying
with the limits that the federal Constitution prescribes for state
What is constitutionally permissible is not necessarily appropriate
from the perspective of choice of law. One should strive for
decisions that not only stay within the constitutional limits but
also are deferential to the needs and policies of the interstate and
international systems, such as discouraging forum shopping and aiming
for interstate and international uniformity of result. Along the same
lines, section 81.130(3)(b) expressly reminds the decisionmaker of
the need of “minimizing the adverse effects on strong legal
policies of other states.”138
Thus, in searching for the most appropriate law under section 81.130,
one should consider which choice of law would produce the least
adverse consequences on the strongly held policies of the involved
states. In this sense, the approach of section 81.130 is an approach
that focuses on consequences. It aspires to identify the state which,
in light of its policies rendered pertinent by its factual and other
relationship to the contract, the underlying transaction and the
parties would bear the most serious legal, social, economic, and
other consequences if its law were not applied to the particular
However, section 81.130 also
looks beyond state interests and the impact of the choice-of-law
decision on those interests. Because the price of choice-of-law
decisions is primarily paid by individual parties, section
81.130(3)(b) reminds the decisionmaker to keep in mind the
substantive policy of “protecting a party from undue imposition by
another party,” and the substantive/multistate policy of
“[f]acilitating the planning of transactions.” Last but not
least, section 81.130(3)(b) also refers to the “justified
expectations of the parties,” but does so in a more precise way
than comparable formulations in the Restatement (Second) and other
codifications. Rather than speaking of expectations in general (such
as the expectation of having a binding contract), this provision
keeps the focus on the multistate nature of the case by speaking of
expectations “concerning which state’s law applies to the issue.”
The message is clear. All other factors being equal, the parties
should not be subjected to a law whose application they had no reason
The Oregon case Lilienthal
is a good vehicle for illustrating the intended operation of section
81.130. As noted earlier, Lilienthal involved a loan contract
made in California between Mr. Lilienthal, a California domiciliary,
and Mr. Kaufman, an Oregon domiciliary. The contract was valid under
California law but invalid under Oregon law because Mr. Kaufman had
been declared a spendthrift in Oregon and, under an Oregon statute,
this made his contracts voidable at the behest of his guardian. The
Oregon Supreme Court found a true conflict between Oregon and
California law and applied Oregon law, invalidating the contract.
a. Identifying the Involved
The first task under section
81.130 is to identify the states that have “a relevant connection
with the transaction or the parties.”141
The illustrative list of relevant connections includes “the place
of negotiation, making, performance or subject matter of the
contract, or the domicile, habitual residence or pertinent place of
business of a party.”142
In Lilienthal, the involved state were only two: California
was the place of the negotiation, formation, and intended performance
of the contract, as well as the domicile of one of the contracting
parties, Mr. Lilienthal, the creditor-plaintiff. Oregon was the
domicile of the other party, Mr. Kaufman, the debtor-defendant.
b. Defining the Pertinent
As signified by the repeated
use of the word “issue,” both section 81.130 and the whole Act
contemplate and require what is known in the conflicts literature as
an “issue-by-issue” analysis.143
This means that the decisionmaker should focus on the particular
“issue” as to which a conflict is claimed to exist between the
laws of the involved states. When a conflict exists with regard to
only one issue, one should focus on the factual contacts and policies
that are pertinent to that issue. When a conflict exists with regard
to more than one issue, each issue should be analyzed separately,
because each may implicate different states, or may bring into play
different policies. Seen from another angle, each involved state may
not have an equally strong claim in regulating all issues in the
case, but only those issues that actually implicate its policies in a
significant way. This “issue-by-issue” analysis is an integral
feature of all modern choice-of-law methodologies.144
This focus on the particular issue facilitates a more nuanced,
individualized, and thus more rational, resolution of conflicts
In Lilienthal, there
was only one issue with regard to which the laws of Oregon and
California conflicted. Mr. Kaufman was incapable of contracting under
the law of his home state of Oregon but capable under the law of
California, where the contract was negotiated and formed. Thus, the
conflict was confined to the issue of contractual capacity.
c. Identifying the Relevant
The next step it to identify
“the policies underlying any apparently conflicting laws . . . that
are relevant to the issue”146
with regard to which a conflict exists. This was a relatively easy
task in Lilienthal. The policy underlying the California rule,
which considered Mr. Kaufman capable of contracting and would uphold
the contract, was the general policy of enforcing contracts and
protecting party expectations. In contrast, the policy underlying
Oregon’s spendthrift rule, which would make the contract voidable
because of defendant’s status as a spendthrift, was a policy of
subordinating this general and otherwise important policy to the more
specific policy of protecting the spendthrift’s family and
ultimately Oregon’s public assistance funds.
d. Evaluating the Relative
Strength and Pertinence of the Conflicting Policies
The next step of the process
is to evaluate the “relative strength and pertinence”147
of the conflicting state policies in light of three sets of factors,
of which section 81.130(3) lists only two. The missing set of factors
are the respective contacts of the involved states to the transaction
and the parties. Indeed, one cannot evaluate a policy’s pertinence
or even strength in the abstract, without considering the contacts of
the state that has that policy and comparing them with the contacts
of the other state. This consideration and comparison is implicit in
the whole tenor of section 81.135.
(i) The relevant contacts,
again. As noted earlier, the relevant contacts in Lilienthal
were the domiciles of the two parties in Oregon and California,
respectively, and the negotiation, formation, and intended
performance of the contract in California. Mr. Kaufman’s domicile
in Oregon was an important contact because it rendered pertinent
Oregon’s policy in protecting his family. Although this is
antiquated by today’s standards, this was Oregon’s policy at the
pertinent time. Rules of contractual incapacity reflect a society’s
determination about the maturity, soundness of mind, and need of
protection of various classes of persons. They are also conscious
legislative determinations that the need of protecting particular
classes of persons and their families is strong enough to override
the general policy of promoting the security of transactions. In
delineating the interstate scope of operation of these rules, it is
appropriate to begin with the premise that they have been enacted
with a view toward protecting people domiciled in the enacting state
rather than with the idea of affecting contracts made therein by
people domiciled elsewhere. Consequently, the enacting state has, in
principle, an interest in applying these rules in every contract
which, whether made within or without its territory, involves one of
its domiciliaries whom it considers in need of protection.
This is not to say, however,
that this interest will always prevail. The interest of one state in
protecting the incapable party may run contrary to the interest that
another, and sometimes the same, state may have in, for instance,
protecting the justified expectations of the other party and the
security of transactions in general. In Lilienthal, Oregon’s
specific interest in protecting the family of the incapable party
runs contrary not only to California’s interest in enforcing the
contract, but also contrary to Oregon’s general interest in
enforcing contracts and encouraging out-of-state financiers to extend
credit to Oregonians.
The fact that Mr. Kaufman went
to California and there negotiated and concluded this contract with a
domiciliary of that state has a bearing on the expectations of the
parties and the interests of their respective states in protecting
those expectations. Although Mr. Lilienthal knew that Mr. Kaufman was
an Oregon domiciliary, Mr. Lilienthal had no reason to suspect that
Oregon, or for that matter any state of the United States, would have
such an obscure rule that considers an adult person without any
visible physical or mental infirmities to be incapable of
contracting. Hence, Mr. Lilienthal would have been justified to
expect that the contract would be enforceable. As for Mr. Kaufman, we
can only speculate on what his expectations might have been and, in
any event, it is somewhat anomalous to speak of the expectations of a
person who is deemed to be incapable of contracting. Be that as it
may, if Mr. Kaufman had any expectation that he could carry Oregon’s
spendthrift rule to California and there inflict it on Mr.
Lilienthal, this would be an expectation that the legal order should
not sanction. Even assuming that it would be more appropriate to
focus on the expectations of the spendthrift’s guardian or family,
it is hard to argue that, having allowed Mr. Kaufman to entrap an
Oregon creditor, Mr. Olshen,148
they should also expect that the same trap would work against an
out-of-state creditor. It is also worth noting that, although the
Lilienthal contract was a small-scale, one time contract, it
was not a “consumer contract.” The fact that it was not a
consumer contract renders less pertinent the policy of protecting the
“weak party.” The fact that it was a small-scale, one-time
contract explains why Mr. Lilienthal should not be expected to
consult legal counsel or research Oregon law.
(ii) The other factors.
The evaluation of the strength and pertinence of the conflicting
policies must also take into account two other sets of factors listed
in section 81.130(3). The first is to examine the impact of the
choice-of-law decision in “[m]eeting the needs and giving effect to
the policies of the interstate and international systems.”149
This factor clearly supported the application of California law in
Lilienthal. Indeed, applying California law under the facts of
this case would not only satisfy the needs and policies of the
interstate system, but would also support Oregon’s own general
policy of enforcing contracts. True enough, that policy had been
subordinated to the specific need of protecting the spendthrift’s
family when the Oregon legislature decided to enact the spendthrift
rule. In cases like Olshen v. Kaufman,150
which do not contain any foreign elements, an Oregon court is bound
to respect this legislatively-established balance between the two
conflicting policies and must apply the spendthrift rule. However, in
multistate cases like Lilienthal, courts have the freedom to
do otherwise, and this freedom is now confirmed or conferred by the
same legislature that enacted the spendthrift rule. In enacting
section 81.130, the Oregon legislature has entrusted Oregon courts
with the task of determining, through the choice-of-law process, the
appropriate territorial reach of the state’s substantive rules,
such as the spendthrift rule, and to do so by considering the
multistate nature of the particular case and the impact of the
court’s choice-of-law decision on the policies and needs of the
interstate and international systems. These considerations make it
clearer that Oregon’s unique spendthrift rule did not and should
not encompass this multistate case. The presence of multistate
elements in Lilienthal either altered or rendered inapplicable
the legislatively-established balance between the general Oregon
policy of enforcing contracts and the specific policy of protecting
the spendthrift’s family. These elements added strength to the
general policy and detracted strength from the specific policy. The
latter policy should not be extended against unsuspecting citizens of
other states who had no reason to be aware of it. As a trading member
of the interstate union and the international community, Oregon has
every reason not to discourage foreign creditors from extending
credit to Oregonians.
Finally, Section 81.130(3)(b)
instructs the court to consider the impact of the choice-of-law
decision on certain substantive and multistate policies. The first
policy, “[f]acilitating the planning of transactions,”151
clearly points to the application of California law, which would
uphold the contract. The same is true of the policy of “giving
effect to justified expectations of the parties concerning which
state’s law applies to the issue.”152
As noted earlier, the fact that Mr. Kaufman went to California and
negotiated and concluded the contract there suggest that, even he
(and even more Mr. Lilienthal) must have expected California law to
apply. The third policy, “protecting a party from undue imposition
by another party,”153
is relevant in consumer contracts and other similar contracts in
which one party is likely to be in a weaker bargaining position.
However, not only was this not a consumer contract, but there was no
evidence that Mr. Kaufman was in a weak bargaining position or that
Mr. Lilienthal was guilty of any “undue imposition” on Mr.
Kaufman. Thus, even this policy does not militate in favor of the
application of the Oregon rule. Finally, the last policy of
“minimizing adverse effects on strong legal policies of other
depends in part on which of the two state’s policies is more
strongly held. In Lilienthal, the court determined that
California’s and Oregon’s policies were equally strong and held
that “in such a case the public policy of Oregon should prevail”
because “[c]ourts are instruments of state policy” and must apply
the “rule which will ‘advance the policies or interests of’
This was a faithful application of Brainerd Currie’s interest
analysis, including its notorious forum chauvinism,156
which subsequent Oregon cases have abandoned,157
and which the new Act denounces. In light of this, and all the
factors discussed earlier, there should be little doubt that, if
Lilienthal were to be decided under the new Act, California
law should be applied as the “most appropriate” law for the
resolution of the particular issue.
VIII. Presumptive Rules
(O.R.S. section 81.135)
Because the choice-of-law
process section 81.130 prescribes is labor intensive, and to some
extent uncertain, it was thought necessary to provide courts with
some measure of certainty and predictability, at least for certain
contracts. Section 81.135 does so by enunciating five presumptive
choice-of-law rules applicable respectively to the five types of
contracts listed therein.
These rules, which are modeled
after the Puerto Rico draft Code and other codifications,158
apply only in the absence of an effective choice-of-law clause under
sections 81.120 and 81.125, and only with regard to issues other than
form, capacity, or consent, which are governed by sections 81.110,
81.112, and 81.115. Furthermore, the presumptive rules do not apply
if the contract in question is governed by Oregon law under section
Finally, each of these
presumptive rules may be displaced if the opposing party demonstrates
that the application of the law designated by the rule is “clearly
inappropriate under the principles of ORS 81.130.”159
In such a case, the court will apply the law it considers “most
appropriate” under the principles of section 81.130. For example,
in a contract for personal services, either party may demonstrate
that, under the principles of section 81.130 it would be clearly
inappropriate to apply the law of the state where the services are
rendered, and that it would be “most appropriate” to apply, for
example, the law of the state where the employee is domiciled and was
IX. Some General Thoughts
The Oregon Act made its
appearance on the American conflicts scene at a time when the initial
enthusiasm for ad hoc approaches that the American conflicts
revolution initiated has all but evaporated. In this
meta-revolutionary phase, the grand question is how to develop an
exit strategy, how to turn the revolution’s initial victory into a
lasting success. Opinions naturally differ on exactly what the next
step should be. For example, in 1999, American conflicts professors
devoted their annual meeting to discussing the need for a Third
thus beginning a debate that still continues.161
Although both the specific debate for a new Restatement and the
general debate about the need for rules are inconclusive, it seems
that, even among academics, Professor Currie’s revolutionary
aphorism that “we are better off without choice of law rules”162
is no longer taken at face value.163
The pendulum has begun swinging back.164
This author has argued that
the time has come to recognize that the American conflicts revolution
has gone too far in embracing flexibility to the exclusion of all
certainty, just as the traditional system had gone too far toward
certainty to the exclusion of all flexibility. A correction is
needed, and a new equilibrium should be sought between these two
perpetually competing needs.165
This author has also argued that it is now necessary and possible
to articulate a new breed of smart, evolutionary choice-of-law rules
that will accomplish both objectives: (1) restore a proper
equilibrium between certainty and flexibility; and (2) preserve the
substantive and methodological accomplishments of the revolution.166
The Oregon Act has been an effort to attain, or at least, approach
these goals. Others will judge whether it has succeeded.
NEW CHOICE-OF-LAW STATUTE
Ch. 164, H.B. No. 2414 of 1991
CONFLICT OF LAWS
AN ACT Relating to Conflict of
Be It Enacted by the People of
the State of Oregon:
the purposes of sections 81.100 to 81.135:
“Law” means any rule of general legal applicability adopted by a
state, whether that rule is domestic or foreign and whether derived
from international law, a constitution, statute, other publicly
adopted measure or published judicial precedent. Except for
references to the law of Oregon, “law” does not include rules
governing choice of law.
“State” means the United States, any state of the United States,
any territory, possession or other jurisdiction of the United States,
any Indian tribe, other Native American group or Native Hawaiian
group that is recognized by federal law or formally acknowledged by a
state of the United States, and any foreign country, including any
territorial subdivision or other entity with its own system of laws.
ORS 81.100 to 81.135 govern the choice of law applicable to any
contract, or part of a contract, when a choice between the laws of
different states is at issue. ORS 81.100 to 81.135 do not apply if
another Oregon statute expressly designates the law applicable to the
contract or part of a contract. ORS 81.100 to 81.135 do not apply to
any contract in which one of the parties is a financial institution,
as defined by 15 U.S.C. 6827, as in effect on January 1, 2002.
CONTRACTS GOVERNED BY OREGON
Specific types of contracts governed by Oregon law.
Notwithstanding any other provision of ORS 81.100 to 81.135, but
subject to the limitations on applicability imposed by ORS 81.102,
the law of Oregon applies to the following contracts:
A contract for services to be rendered in Oregon, or for goods to be
delivered in Oregon, if Oregon or any of its agencies or subdivisions
is a party to the contract. The application of Oregon’s law
pursuant to this subsection may be waived by a person authorized by
Oregon’s law to make the waiver.
A contract for construction work to be performed primarily in Oregon.
A contract of employment for services to be rendered primarily in
Oregon by a resident of Oregon.
(4)(a) A consumer contract,
The consumer is a resident of Oregon at the time of contracting; and
The consumer’s assent to the contract is obtained in Oregon, or the
consumer is induced to enter into the contract in substantial measure
by an invitation or advertisement in Oregon.
For the purposes of this subsection, a consumer contract is a
contract for the supply of goods or services that are designed
primarily for personal, familial or household use.
RULES GOVERNING FORM OF
CAPACITY TO CONTRACT AND
Validity of form. A
contract is valid as to form if the contract meets the requirements
prescribed either by the law chosen by the parties under ORS 81.120
and 81.125, the law applicable under ORS 81.105, 81.130 or 81.135, or
the law of the state from which any party or the party’s agent has
assented to the contract unless that state has no other connection to
the parties or the transaction.
Capacity to contract.
(1) A party has the capacity to enter into a contract if the party
has that capacity under the law of the state in which the party
resides or the law applicable to this issue under ORS 81.105, 81.130
A party that lacks capacity to enter into a contract under the law of
the state in which the party resides may assert that incapacity
against a party that knew or should have known of the incapacity at
the time the parties entered into the contract. If a party
establishes lack of capacity in the manner provided by this
subsection, the consequences of the party=s incapacity are governed
by the law of the state in which the incapable party resides.
Consent. (1) A
party has consented to a contract if the law applicable under ORS
81.105, 81.130 or 81.135 so provides.
In a consumer contract or employment contract, the consumer or
employee whose assent to a contract was obtained in the state of the
party’s residence, or whose conduct leading to the contract was
primarily confined to that state, may invoke the law of that state to
establish that the party did not consent to the contract or that the
consent was not valid by reason of fraud or duress.
CHOICE OF LAW MADE BY PARTIES
Choice of law made by parties.
(1) Except as specifically provided by ORS 81.105, 81.110, 81.112,
81.115 or 81.125, the contractual rights and duties of the parties
are governed by the law or laws that the parties have chosen. The
choice of law may extend to the entire contract or to part of a
The choice of law must be express or clearly demonstrated from the
terms of the contract. In a standard‑form contract drafted
primarily by only one of the parties, any choice of law must be
express and conspicuous.
(3) The choice of law may be
made or modified after the parties enter into the contract. Any
choice of law made or modified after the parties enter into the
contract must be by express agreement.
Unless the parties provide otherwise, a choice of law or modification
of that choice operates retrospectively to the time the parties
entered into the contract. Retrospective operation under the
provisions of this subsection may not prejudice the rights of third
Limitations on a choice of law by the parties.
(1) The law chosen by the parties pursuant to ORS 81.120 does not
apply to the extent that its application would:
(a) Require a party to perform
an act prohibited by the law of the state where the act is to be
performed under the contract;
(b) Prohibit a party from
performing an act required by the law of the state where it is to be
performed under the contract; or
Contravene an established fundamental policy embodied in the law that
would otherwise govern the issue in dispute under ORS 81.130.
For purposes of subsection (1)(c) of this section, an established
policy is fundamental only if the policy reflects objectives or gives
effect to essential public or societal institutions beyond the
allocation of rights and obligations of parties to a contract at
LAW APPLICABLE IN THE ABSENCE
AN EFFECTIVE CHOICE BY THE
General rule. To
the extent that an effective choice of law has not been made by the
parties pursuant to ORS 81.120 or 81.125, or is not prescribed by ORS
81.105, 81.110, 81.112, 81.115 or 81.135, the rights and duties of
the parties with regard to an issue in a contract are governed by the
law, in light of the multistate elements of the contract, that is the
most appropriate for a resolution of that issue. The most appropriate
law is determined by:
Identifying the states that have a relevant connection with the
transaction or the parties, such as the place of negotiation, making,
performance or subject matter of the contract, or the domicile,
habitual residence or pertinent place of business of a party;
(2) Identifying the policies
underlying any apparently conflicting laws of these states that are
relevant to the issue; and
Evaluating the relative strength and pertinence of these policies in:
(a) Meeting the needs and
giving effect to the policies of the interstate and international
Facilitating the planning of transactions, protecting a party from
undue imposition by another party, giving effect to justified
expectations of the parties concerning which state’s law applies to
the issue and minimizing adverse effects on strong legal policies of
Presumptive rules for specific types of contracts.
To the extent that an effective choice of law has not been made by
the parties pursuant to ORS 81.120 or 81.125, or is not prescribed by
ORS 81.105, 81.110, 81.112, or 81.115, contracts described in
subsection (2) of this section are governed by the law of the state
specified in subsection (2) of this section unless a party
demonstrates that the application of that law would be clearly
inappropriate under the principles of ORS 81.130.
(2)(a) Contracts involving the
occupancy of real property, the land use of property or the recording
of interests in real property are governed by the law of the state
where the property is situated.
(b) Contracts for personal
services are governed by the law of the state where the services are
to be primarily rendered pursuant to the contract.
Contracts for franchises, as defined in ORS 650.005, except for
licensing clauses in such contracts, are governed by the law of the
state where the franchise is to operate pursuant to the contract.
Licensing contracts and licensing clauses in contracts for
franchises, as defined in ORS 650.005, are governed by the law of the
state where the licensor has its place of business or residence with
the closest connection to the transactions between the parties. For
purposes of this subsection, “licensing” means a grant of a
privilege, created by contract, that allows one party, the licensee,
to use the property or right of another party, the licensor.
Agency contracts are governed by the law of the state where the
agent’s duties are to be primarily performed.
11. (1) Except as
provided in subsection (2) of this section, ORS 81.100 to 81.135
apply to all contracts, whether entered into before, on or after the
effective date of this 2001 Act, unless that application would
violate constitutional prohibitions against impairment of contracts.
(2) ORS 81.100 to 81.135 do
not apply to any choice of law that is at issue in an action or
proceeding commenced before the effective date of this 2001 Act
[January 1, 2002].
12. The unit and
section captions used in this 2001 Act are provided only for the
convenience of the reader and do not become part of the statutory law
of this state or express any legislative intent in the enactment of
this 2001 Act.
* *Dean and Professor of Law, Willamette University College of
Law; Member, Oregon Law Commission; LL.B. (Priv. L.), LL.B. (Publ.
L.) University of Thessaloniki; LL.M., S.J.D., Harvard Law School.
The case that launched the revolution is Babcock v. Jackson,
191 N.E.2d 279 (N.Y. 1963), a case involving tort conflict decided
by the New York Court of Appeals on May 9, 1963.
For documentation and discussion of this movement, see Symeon
C. Symeonides, The American Choice-of-Law Revolution: Past, Present
and Future (2006) [hereinafter The
395 P.2d 543 (Or. 1964). Lilienthal was decided on September
30, 1964. It is discussed infra at text accompanying notes
66–69 & 140–57.
Two weeks after Lilienthal, Pennsylvania became the third
state to join the revolution in Griffith v. United Air Lines,
Inc., 203 A.2d 796 (Pa. 1964), a case involving a tort conflict
and decided on October 14, 1964. In 1967, Oregon completed the
abandonment of the traditional system by discarding the lex loci
delicti rule in tort conflicts. See Casey v. Manson
Constr. & Eng’g Co., 428 P.2d 898 (Or. 1967).
Selected Essays on the Conflict of Laws (1963). For a
discussion of this approach, as well as its judicial following
today, see Symeonides, The
Choice-of-Law Revolution, supra note 2, at 13–24,
See W.H. Barber Co. v. Hughes, 63 N.E.2d 417 (Ind. 1945);
Auten v. Auten, 124 N.E.2d 99 (N.Y. 1954). These two cases, as well
as a Puerto Rico case, Maryland Casualty Co. v. San Juan Racing
Ass’n, 83 P.R. 538 (1961), adopted the “center of gravity”
approach, which is generally considered the transitional point
between the traditional system and modern approaches.
Lilienthal was methodologically revolutionary in the
sense that it opened new ways of thinking about conflict of laws.
This does not mean that Lilienthal was correctly decided. For
this reason, Lilienthal was overruled by the statute
discussed in this Article. See infra text following note 66.
Choice-of-Law Revolution, supra note 2, at 38–51.
Cf. Friedrich K. Juenger, A Third Conflicts Restatement?,
75 Ind. L.J. 403, 403
(2000) (“[O]ne finds authors who are at doctrinal loggerheads
peacefully united in a single footnote; one encounters prose so
turgid and stilted that one suspects that the judge (or more likely
the law clerk who actually drafted the opinion) never really grasped
the idea behind the particular conflicts approach the court purports
Institute, Restatement of the Law: Conflict of Laws (1934).
See Currie, Selected
Essays, supra note 5, at 180 (“The [traditional]
rules . . . have not worked and cannot be made to work . . . . But
the root of the trouble goes deeper. In attempting to use rules we
encounter difficulties that stem not from the fact that the
particular rules are bad . . . but rather from the fact that we have
such rules at all.”). See also id. at 183 (“We would be
better off without choice-of-law rules.”).
P. John Kozyris, Interest Analysis Facing Its Critics, 46
Ohio St. L.J. 569, 578
See id. (“any system calling for open-ended and endless
soul-searching on a case-by-case basis carries a high burden of
persuasion”); Maurice Rosenberg, Comments on Reich v.
Purcell, 15 UCLA L. Rev.
641, 644 (1968) (“The idea that judges can be turned loose in the
three-dimensional chess games we have made of [conflicts] cases, and
can be told to do hand-tailored justice, case by case, free from the
constraints or guidelines of rules, is a vain and dangerous
See Patrick J. Borchers, Empiricism and Theory in
Conflicts Law, 75 Ind. L.J. 509,
509 (2000) (“[T]he extreme flexibility of the modern approaches
probably brings increased litigation costs, in particular through
the need to prosecute appeals. Because cases settle (at least for
economically rational litigants) when the parties’ assessments of
the value of the case converge to within the expected cost of
pursuing the case to judgment, the ever‑present wild card of
choice of law may discourage settlement.”).
SeeEugene F. Scoles,
Peter Hay, Patrick J. Borchers & Symeon C. Symeonides, Conflict
of Laws 107–108, 789–790 (4th ed. 2004); Patrick J.
Borchers, Back to the Past: Anti-Pragmatism in American Conflicts
Law, 48 Mercer L. Rev.
721, 724 (1997); P. John Kozyris, The Conflicts Provisions of the
ALI’s Complex Litigation Project: A Glass Half Full?, 54 La.
L. Rev. 953, 956 (1994) (“Conflicts theorists . . . have
been notoriously indifferent to the issue of efficiency, treating
every case as a unique specimen calling for custom-made handling on
the tacit assumption that litigational resources are infinite.”);
Eirn A. O’Hara & Larry E. Ribstein, From Politics to
Efficiency in Choice of Law, 67 U.
Chi. L. Rev. 1151 (2000); Shirley A. Wiegand, Fifty
Conflict of Laws “Restatements”: Merging Judicial Discretion and
Legislative Endorsement, 65 La.
L. Rev. 1 (2004); see also Kaczmarek v. Allied Chem.
Corp., 836 F.2d 1055, 1057 (7th Cir. 1987) (Posner, J.).
Borchers & Symeonides , supra note 16, at107 (“Contradictory results in the case law, confusion, and
also the ‘homeward trend’ have been the resulting
Kozyris, Interest Analysis, supra note 12, at 580.
Loussouarn & Pierre Bourel, Droit International PrivÉ
142–153 (7th ed. 2001).
See P. John Kozyris, Conflicts Theory for Dummies: Après
le Deluge, Where Are We on Producers Liability?, 60 La.
L. Rev. 1161, 1162 (2000) (“[T]elling the courts in each
conflicts case to make a choice and fashion the applicable law ‘ad
hoc’ and ‘anew’ (i.e., without legislative or precedential
direction) on the basis of what is right (just, proper, good,
suitable, interested, etc.), as is often done under the prevailing
conflicts theories, appears to me not only inconsistent with the
basic principles of separation of powers, not only burdensome and
potentially arbitrary beyond reason, not only disorienting to the
transacting person, but also essentially empty of meaning. . . .
[U]npredictable law is not law to begin with.”).
In anthropomorphic terms, “[t]he conflicts revolution has been
pregnant for too long. The conflicts misery index, which is the
ratio of problems to solutions, or of verbiage to result, is now
higher than ever.” P. John Kozyris, Foreword and Symposium on
Interest Analysis in Conflict of Laws: An Inquiry into Fundamentals
with a Side Glance at Products Liability, 46 Ohio
St. L.J. 457, 458 (1985).
Established by statute, the Commission is Oregon’s official law
reform agency, although it is housed at Willamette University
College of Law under an agreement between the State and Willamette
University and is directed by a member of the Willamette faculty,
Professor Jeff Dobbins. For the history of the Commission and its
work in the last ten years, see David R. Kenagy, The Oregon Law
Commission at Ten: Finding Vision for the Future in the Functions of
the Past, 44 Willamette
L. Rev. 169 (2007). David Kenagy was the Commission’s first
The only other state to enact a comprehensive choice-of-law
codification was Louisiana, in 1991. See Louisiana Civil
Code, Book IV, enacted into law by Act 923 of 1991, effective
January 1, 1992. For a discussion of the contract provisions by the
codification’s drafter, see Symeon C. Symeonides, Louisiana
Conflicts Law: Two “Surprises,” 54 La.
L. Rev. 497 (1994). For judicial applications of the
codification, see Patrick J. Borchers, Louisiana’s Conflicts
Codification: Some Empirical Observations Regarding Decisional
Predictability, 60 La. L.
Rev. 1061 (2000).
Oregon House Bill 2414 of 2001 was signed by the Governor on May 21,
2001, after being unanimously approved by both houses of the Oregon
Legislature. The Act is now consolidated as Or.
Rev. Stat. §§ 81.100–81.135 (2005). The Act is reproduced
in an Appendix to this Article.
According to its section 11, the Act applies to actions or
proceedings commenced on or after its effective date, even with
regard to contracts made before that date, “unless that
application would violate constitutional prohibitions against
impairment of contracts.”
The word is Greek and it means the exposition, objective
explanation, or “drawing out” of the meaning of a given text.
The author was a member of the drafting group chaired by Dominick
Vetri and consisting of J. Michael Alexander, Wallace Carson,
Mildred Carmack, Jonathan Hoffman, Maurice Holland, Douglas Houser,
Hans Linde, Eugene Scoles, and William Snouffer. The Reporter for
this project was James A.R. Nafziger. For his analysis, see James
A.R. Nafziger, Oregon’s Conflicts Law Applicable to Contracts,
38 Willamette L. Rev.
Puertorriqueña de Jurisprudencia y Legislacion, Proyecto para la
Codificación del Derecho Internacional Privado de Puerto Rico
(Symeon C. Symeonides & Arthur T. von Mehren, Rapporteurs)
(Puerto Rico 1991) [hereinafter Puerto Rico Draft Code] (on file
with journal). For a subsequent version drafted by this author under
the auspices of the Commisión Conjunta Permanente para la Revisión
y Reforma del Código Civil de Puerto Rico, see
http://www.codigocivilpr.net/. For a discussion of the contract
provisions of the draft code, see Symeon C. Symeonides, Codifying
Choice of Law for Contracts: The Puerto Rico Project, inLaw and Justice in a
Multistate World: Essays in Honor of Arthur T. von Mehren 419
(J. Nafziger & S. Symeonides, eds. 2002) [hereinafter
Symeonides, Puerto Rico Project]. See also Symeon C.
Symeonides, Revising Puerto Rico’s Conflicts Law: A Preview,
28 Colum. J. Transnat’l L.
413 (1990). Political reasons have delayed the introduction of the
draft to the Puerto Rico Legislature until 2007, when it was
introduced as the seventh book of the revised Puerto Rico Civil
In turn, the Puerto Rico Code relied on an earlier codification
drafted by the same author for the state of Louisiana. See
Symeonides, Louisiana Conflicts Law: Two “Surprises,”supra note 23.
This article draws from Symeon C. Symeonides, Codifying Choice of
Law for Contracts: The Oregon Experience, 67 Rabels
Zeitschrift für Ausländisches und Internationales Privatrecht
726 (2003) (an article for foreign readers).
SeeOr. Rev. Stat.
§ 81.100(1) (2005). This provision defines law as including
international law but excluding the law of choice of law. This
exclusion is designed to avoid the complexities and potential
circularity of renvoi, namely the application of the
choice-of-law rules of another state. For a discussion of renvoi,
see Scoles, Hay, Borchers &
Symeonides ,supra note 16, at138-142; Symeon C.
Symeonides, Wendy C. Perdue & Arthur T. von Mehren, Conflict of
Laws: American, Comparative, International 66–69 (2d ed.
SeeOr. Rev. Stat.
§ 81.100(2). This provision defines state so as to include not only
states of the United States but also any country or a territorial
division of a country that has its own system of law. This Article
adopts the same usage for the word state.
same section also provides that the Act does not apply “to any
contract in which one of the parties is a financial institution, as
defined by 15 U.S.C. 6827.” This sentence pertains to certain
financing contracts that would have been exempted from the Act even
in the absence of this sentence. However, a particular interest
group insisted on the insertion of this sentence under the threat of
defeating or delaying the enactment of the Act.
See, e.g.,id. §§ 108.710 (premarital agreements),
194.555 (foreign notarial acts), 12.410–12.480 (statutes of
limitations), 36.508 (mediation and arbitration).
Needless to say, the same roadmap can be followed by an arbitrator
and any other decision-maker, including a lawyer in planning for
litigation. On the other hand, a lawyer drafting a contract will
likely follow a different roadmap.
A unilateral choice-of-rule is a rule that mandates the application
of the law of the forum to cases that have certain contacts with the
forum state without addressing the question of which governs
analogous cases that lack those contacts. For the difference between
“unilateralism” and “multilateralism” (or “bilateralism”),
see Symeon C. Symeonides, Accommodative Unilateralism as a
Starting Premise in Choice of Law, inBalancing
of Interests: Liber Amicorum Peter Hay 417–434 (2005).
See Or. Rev. Stat.
§ 81.105(1) (also allowing the state agency to waive the
application of Oregon law).
Seeid.§ 81.105(2). Unlike the other three subsections, this
subsection does not require that any party to the contract be an
Id. § 81.105(4)(b) (defining consumer contracts as
those “for the supply of goods or services that are designed
primarily for personal, familial or household use.”) This
definition was taken from the Puerto Rico Draft Code and is similar
to definitions contained in many European codifications. See,
e.g., Convention on the Law Applicable to Contractual
Obligations, 1980 O.J. (L 266) Art. 5(1) [hereinafter Rome
Convention]; Convention on the Law Applicable to Contracts for the
International Sale of Goods, Dec. 22, 1986, art. 2(c) [hereinafter
Hague Sales Convention]; United Nations Convention on the
International Sale of Goods, April 11, 1980, art. 2(a) [hereinafter
CISG]; Art. 29(1) of the Introductory Law to the German Civil Code
(Transl. by Wegen, 27 I.L.M.
1, 18 (1988)) [hereinafter EGBGB]; and Art. 120 of the Swiss
codification, Dec. 18, 1987 (Transl. by Cornu, Hankins &
Symeonides, 37 Am. J. Comp.
L. 193 (1989)) [hereinafter Swiss Code]. The 2001 revisions
of the U.C.C. define a consumer as “an individual who enters into
a transaction primarily for personal, family, or household
purposes.” U.C.C. 1-201(b)(11) (2001 Rev.).
SeeOr. Rev. Stat.
§ 81.105(4)(a) (requiring that the consumer’s assent to the
contract must have been obtained in Oregon, or that the consumer
must have been “induced to enter into the contract in substantial
measure by an invitation or advertisement in Oregon.”).
This includes issues of form, capacity, and consent for which the
Act provides special choice-of-law rules. See id. §§
81.110, 81.112, and 81.115 (containing cross-references to Section
See alsoid. § 81.120(1) (cross-referencing to
Section 81.105 and thus expressly exempting these contracts from the
scope of party autonomy).
As used hereafter, the term state “interest” is a term of art
with a well-defined technical meaning in conflicts literature. A
state is deemed to have an “interest” when the policies,
objectives, or purposes embodied in its law would be adversely
affected or impaired by the non-application of that law to the case
at hand. Before asserting that a state has an interest in applying
its law, one must: (1) identify, through the interpretative process,
the objective or purpose of that law; and (2) demonstrate that the
state’s contacts with the case are such as to bring it within the
law’s intended reach. Thus, an “interest” is not a surmised,
unilateral, active desire of a state to apply its law to any and all
cases, but rather the result of an objective evaluation of the
consequences that would follow from not applying that law to a case
that has pertinent contacts with the state. For fuller discussion of
state interest, see Symeonides,
The Choice-of-Law Revolution, supra note 2, at15–18, 370–373.
U.C.C. § 1-301(e)(2). If the contract is a sale of goods and the
consumer made the contract and took delivery of the goods in a state
other than his home state, the consumer is entitled to the
protection of the law of that state. See id.
Articles 41–43 of the Puerto Rico Draft Code allow consumers,
employees, and insurers to opt out of the automatic application of
forum law under those articles and to submit to the ordinary
choice-of-law process, which may or may not lead to forum law. For a
discussion of the specifics and the rationale of these provisions,
see Symeonides, Puerto Rico Project, supra note 28, at
For similar provisions, see La.
Civ. Code, Art. 3538 (2007); Puerto Rico Draft Code, supra
note 28, at art. 39. For extensive comparative discussion of the
validation principle, see Symeon
C. Symeonides, Private International Law at the End of the 20th
Century: Progress or Regress? 50–52 (1999) [hereinafter
“Progress or Regress?”].
For similar provisions, see Puerto Rico Draft Code, supra
note 28, at art. 38(a); Rome Convention, supra note 44, at
art. 9(1); Hague Sales Convention, supra note 44, art. 11(1);
EGBGB, supra note 44, at art. 11(1); Swiss code, supra
note 44, at art. 124(1); and Restatement
(Second) of Conflict of Laws § 199(1) (1971).
When the parties have agreed to submit their contract to the laws of
more than one state, the question of which one of these laws should
be deemed the chosen law for purposes of form is a matter of
contract interpretation. When the parties have chosen a law for only
part of their contract, then the question is one of both contract
interpretation and judicial discretion under the principles of
Stat. § 81.110. The
reference to section 81.105 presupposes that the contract is one of
those listed in that provision and has the Oregon contacts specified
therein. Likewise, the reference to section 81.135 contemplates
contracts for which that section provides a presumptive rule.
As the drafters of the Rome Convention suggest, when a contract is
subject to several laws, it would be reasonable to apply the law
applicable to the part of the contract most closely connected with
the disputed condition on which its formal validity depends. Mario
Giuliano & Paul Lagarde, Report on the Convention on the Law
Applicable to Contractual Obligations, in Peter North,
Contract Conflicts 355, 384 (1982).
The same approach applies to the contracts referred to in section
81.135. The cross-reference to section 81.110 means that, if the
contract is one of those enumerated in section 81.135 and satisfies
the form requirements of the law applicable under that section, the
contract should be sustained as to form, unless the party arguing
for invalidity demonstrates that, with regard to the issue of form,
the application of that law would be clearly inappropriate under the
principles of section 81.130.
See, e.g., Rome Convention, supra note 44, at art.
9(1)-(3); Hague Sales Convention, supra note 44, at art.
11(1)-(3); EGBGB, supra note 44, at art. 11(1)-(3); Swiss
code, supra note 44, at art. 124(1)-(2).
The sources of this provision are 3539 of the Louisiana
codification and article 39 of the Puerto Rico Draft Code.
Stat. § 81.112. The
cross-reference to sections 81.105 and 81.135 is confined to those
contracts that fall within the scope of those sections (i.e.,
contracts governed by Oregon law, and contracts subject to
presumptive rules), while the cross-reference to section 81.130
encompasses all other contracts.
In these cases, if the laws of both states consider the party
capable, then the contract should be upheld as to capacity. If the
laws of both states consider that party incapable, then the contract
is invalid and the second sentence of subsection (2) of section
81.112 becomes operable. It provides that in such a case, the
consequences of incapacity, such as the availability and
consequences of annulment, are governed by the law of that party’s
For similar rules, see Rome Convention, supra note 44, at
art. 11, which provides that “[i]n a contract concluded between
persons who are in the same country, a natural person who would have
capacity under the law of that country may invoke his incapacity
resulting from another law only if the other party to the contract
was aware of this incapacity at the time of the conclusion of the
contract or was not aware thereof as a result of negligence.”
Benelux Treaty on Private International Law, art. 2 (1969), which
provides that “a person declared incapable by his law may not
invoke his incapacity against one who . . . has in good faith and in
conformity with the law of the place of the act considered him to be
The very fact that section 81.112 calls for the application of
whichever of the two law would validate the contract implies
a rejection of the automatic application of the law of the domicile
of the incapable party, even when that domicile is in the forum
state, and negates any inference that one should approach this case
with any presumption in favor of Oregon law. Rather, one should
approach this question with an open mind guided by the flexible and
non-parochial approach prescribed in section 81.130.
See infra text accompanying notes 140 et seq. See
also Symeon C. Symeonides, Resolving Six Celebrated Conflicts
Cases Through Statutory Choice-of-Law Rules, 48 Mercer
L. Rev. 837–69 (1997) (discussing how Lilienthal
would be decided under the similarly structured articles of the
Most conflicts codifications would reach the same result. See
Symeonides, Progress or Regress ?,supra note 53, at51–52.
For comparable provisions, see Puerto Rico Draft Code, supra
note 28, at art. 40; Rome Convention, supra note 44, at
art. 8; EGBGB, supra note 44, at art. 31; Hague Sales
Convention, supra note 44, at art. 10; Swiss code, supra note
44, at art. 123; and Restatement
(Second) of Conflict of Laws, supra note
Symeonides. Perdue & von
Mehren, supra note 31, at 338.
Russell J. Weintraub, Functional Developments in Choice of Law
for Contracts, in Recueil
des Cours 239, 271 (1984-VI).
Wayman v. Southard, 23 U.S. 1, 48 (1825); see also Pritchard
v. Norton, 106 U.S. 124 (1882).
See Scoles, Hay,
Borchers & Symeonides,supra note 16, at 952 n.1.
See2 J. Beale,
Treatise on the Conflicts of Laws 332.2 (1935) (attacking
party autonomy because “at their will . . .[parties] can free
themselves from the power of the law which would otherwise apply to
(Second) of Conflict of Laws, supra note 54, at
§ 187; discussion infra at note 94.
& von Mehren,supra note 31, at 339 (“About
twenty percent of conflicts cases decided by intermediate courts and
courts of last resort every year involve a choice‑of‑law
clause. . . . Although this is a high percentage, it is probably
even higher if one considers lower court cases that are not appealed
or contracts that do not result in litigation.”).
For in depth discussion, see Scoles,
Hay, Borchers & Symeonides, supra note 16, at947-987.
For a similar scheme, see La.
Civ. Code Ann. art. 3540 (2007), and Puerto Rico Draft Code,
supra note 28, at art. 34.
See, e.g,.EGBGB, supra note 44, at Art. 42 (“After
the event giving rise to a non-contractual obligation has
occurred, the parties may choose the law that shall apply to the
obligation.”) (emphasis added); Belgian Code of Private
International Law, Art. 101 (accord). Article 14 of the newly
proposed European Union’s Regulation known as “Rome II”
allows pre-tort choice-of-law clauses only if all the parties are
pursuing a commercial activity and the clause is freely negotiated.
See Regulation on the Law Applicable to Non-Contractual
Obligation, July 11, 2007, O.J. (L 199) p. 40 (2007). Under European
Union Law, a Regulation is binding and directly applicable in all
Member States of the Union and preempts any contrary national law.
The pertinent section of the Restatement (Second), section 187,
speaks of the law chosen by the parties “to govern their
contractual rights.” The same is true of the Louisiana
Civ. Code Ann. art. 3540.
For cases holding that the clause did not encompass
contract-related tort claims between the same parties, see, e.g.,Benchmark Electrics, Inc. v. J.M. Huber Corp., 343 F.3d 719
(5th Cir. 2003); Green Leaf Nursery v. E.I. DuPont De Nemours &
Co., 341 F.3d 1292 (11th Cir. 2003); Krock v. Lipsay, 97
F.3d 640 (2d Cir. 1996); Valley Juice Ltd., Inc. v. Evian Waters
of France, Inc., 87 F.3d 604 (2d Cir. 1996); Caton v. Leach
Corp., 896 F.2d 939, 942-43 (5th Cir. 1990); Financial Trust
Co. Inc. v. Citibank, North America, 268 F.Supp.2d 561 (D. V.I.
2003); Gloucester Holding Corp. v. U.S. Tape and Sticky Products,
LLC, 832 A.2d 116 (Del. Chan. 2003); Owen J. Roberts School
Dist. v. HTE, Inc., 2003 WL 735098 (E.D.Pa. 2003); Lewis Tree
Service, Inc. v. Lucent Technologies Inc., 239 F.Supp.2d 322
(S.D.N.Y. 2002); Medline Industries Inc. v. Maersk Medical Ltd.,
230 F.Supp.2d 857 (N.D.Ill. 2002); MBI Acquisition Partners, L.P.
v. Chronicle Publishing Co., 2001 WL 148812 (W.D. Wis. 2001);
Twinlab Corp. v. Paulson, 724 N.Y.S.2d 496 (N.Y.A.D. 2001);
Florida Evergreen Foliage v. E.I. DuPont De Nemours & Co.,
135 F.Supp.2d 1271 (S.D.Fla. 2001); Precision Screen Machines,
Inc. v. Elexon, Inc., 1996 WL 495564 (N.D.Ill. 1996); Union
Oil Co. v. John Brown E. & C., No. 94 C 4424, 1994 WL 535108
(N.D.Ill.,1994); Shelley v. Trafalgar House Public Ltd. Co.,
918 F.Supp. 515 (D.P.R.1996); Telemedia Partners Worldwide, Ltd.
v. Hamelin Ltd., 1996 WL 41818 (S.D.N.Y.1996); Champlain
Enterprises, Inc. v. United States, 945 F.Supp. 468
(N.D.N.Y.1996); Young v. W.S. Badcock Corp., 474 S.E.2d 87
(Ga.App.1996); Young v. Mobil Oil Corp., 735 P.2d 654
(Or.Ct.App.1987); Ezell v. Hayes Oilfield Const. Co., Inc.,
693 F.2d 489 (5th Cir.1982), cert. denied, 464 U.S. 818 (1983). For
cases reaching the opposite conclusion, see Nedlloyd Lines B.V.
v. Superior Court, 834 P.2d 1148 (1992); Forrest v. Verizon
Communications, Inc., 2002 WL 1988367 (D.C. 2002); Turtur v.
Rothschild Registry International Inc., 26 F.3d 304 (2d Cir.
1994); Roby v. Corporation of Lloyd’s, 996 F.2d 1353 (2d
Cir. 1993); Wireless Distributors, Inc. v. Sprintcom, Inc.,
2003 WL 22175607 (N.D.Ill. 2003); Birnberg v. Milk Street
Residential Associated Ltd. Partnership, 2003 WL 151929
(N.D.Ill. 2003); Twohy v. First National Bank of Chicago, 758
F.2d 1185 (7th Cir. 1985); About. Com, Inc. v. Targetfirst, Inc.,
2002 WL 826953 (S.D.N.Y. 2002).
Borchers & Symeonides, supra note 16, at809–12, 949–50;
Symeonides, Perdue & Von Mehren, supra note 31, at
360, 390; Symeon C. Symeonides, Choice of Law in the American
Courts in 2002: Sixteenth Annual Survey, 51 Am.
J. Comp. L. 1, 67-68 (2003).
Perdue & von Mehren, supra note 31, at 358–59
(suggesting a distinction between intended scope and permissible
scope of the choice-of-law clause).
Sutton, 181 F.Supp.2d at 508 (emphasis added) (“any dispute
arising out of or relating in anyway to [plaintiff’s] relationship
with [defendant] shall be subject to final, non-appealable, binding
arbitration . . . Exclusive venue for any dispute resolution shall
be in Portland, Oregon and Oregon law shall control for all
However, the second sentence of section 81.120(2) contemplates
written clauses when it provides that “in a standard-form contract
drafted primarily by only one of the parties, the choice of law must
be express and conspicuous.” Id.
See Nakhleh v. Chemical Construction Corp., 359 F.Supp. 357
(S.D.N.Y. 1973). Many other codifications expressly sanction oral
choice-of-law agreements. For citations, see Scoles,
Hay, Borchers & Symeonides, supra note 16, at948.
(Second) of Conflict of Laws, supra note 54, at§ 187, cmt. a (“It does not suffice to demonstrate that
the parties, if they had thought about the matter, would have wished
to have the law of a particular state applied.”).
The draft, which was based on Article 34 of the Puerto Rico Draft
Code, also contained the phrase “or from the conduct of the
parties.” See Symeonides, Puerto Rico Project, supra
note 28, at 419, 421.
As opposed, for instance, to the verb “result,” which is used in
Article 116 of the Swiss code.
This phrase was borrowed from the Uniform Commercial Code (see Or.
§ 71.2010) and is intended to have the same meaning as in the
For similar provisions see Rome Convention, supra note 44,
at art. 3(1); EGBGB, supra note 44, at art. 27(1); Hague
Sales Convention, supra note 44, at art. 7(1); Puerto Rico
Draft Code, supra note 28, at art. 34; and La.
Civ. Code Ann. art. 3540 cmt. e (2007).
See, e.g,. Restatement
(First) of Conflict of Laws 325, 326, 358 (1933).
See also Puerto Rico Draft Code, supra note 28, at
art. 34; La. Civ. Code Ann.
art. 3540 cmt. e.
Compare with Rome Convention, supra note 44, art.
2(3), EGBGB, supra note 44, art. 27(2), Hague Sales
Convention, supra note 44, art. 7(2), Swiss code, supra
note 44, at art. 116(3), and Puerto Rico Draft Code, supra
note 28, at art. 34.
(Second) of Conflict of Laws,supra note 54, at187.
Or. Rev. Stat. §
81.120 cmt. 3, reprinted in 38 Willamette
L. Rev. 397, 421 (2002). The Reporter’s comments suggest
the same possibility with regard to the court’s choice-of-law
decision under the general rule of section 81.130 for contracts that
do not contain an effective choice-of-law clause. SeeOr.
Rev. Stat. § 81.130 cmt. 2(c) (2005). However, the repeated
reference to states in that section casts doubt on whether the court
can apply non-state norms under that section.
For an extensive discussion of non-state norms and the extent to
which they may govern multistate contracts, see Symeon C.
Symeonides, Contracts Subject to Non-State Norms: United States
National Report to the 17th Congress of Comparative Law, 54 Am.
J. Comp. L. 209 (2006 Supp.); Symeon C. Symeonides, Party
Autonomy and Private Law-Making in Private International Law: The
Lex Mercatoria that Isn’t, inFestschrift
für K.D. Kerameus (forthcoming 2008).
These limitations are discussed infra pp. 127-31.
Compare with Restatement
(Second) of Conflict of Laws,supra note 54, at
§ 187(3), andLa.
Civ. Code Ann. art. 3540 cmt. (e) (2007).
Renvoi is the application of the choice-of-law rules of a
state other than the forum. For discussion of the various
possibilities and problems, see Scoles,
Hay, Borchers & Symeonides,supra note 16, at
138–42; Symeonides, Perdue
& von Mehren, supra note 31, at 66–69.
Borchers & Symeonides,supra note 16, at 129–37;
Symeonides, Perdue & von
Mehren,supra note 31, at 384–87.
See Federal Deposit Ins. Corp. v. Petersen, 770 F.2d 141,
142-43 (10th Cir. 1985); Florida State Bd. of Admin., v. Eng’g &
Envtl. Servs., Inc., 262 F.Supp.2d 1004 (D.Minn. 2003); W. Group
Nurseries, Inc. v. Ergas, 211 F.Supp.2d 1362 (S.D.Fla. 2002); Shaw
v. Rivers White Water Rafting Resort, 2002 WL 31748919 (E.D.Mich.
2002); Springfield Oil Servs., Inc. v. Costello, 941 F.Supp. 45
(E.D.Pa. 1996); Manion v. Roadway Package System, Inc., 938 F.Supp.
512 (C.D .Ill. 1996); In re W. United Nurseries, Inc. v. Estate of
Adams, 191 B.R. 820 (Bankr. D. Ariz. 1996); In re Fineberg, 202 B.R.
206 (Bankr. E.D. Pa. 1996); Long v. Holland Am. Line Westours, Inc.,
26 P.3d 430 (Alaska 2001); Educ. Research Inst. v. Lipsky, 2002 WL
1463461 (Cal. Ct. App. 2002); Hambrecht & Quist Venture Partners
v. Am. Med. Int’l, Inc., 46 Cal.Rptr.2d 33 (Cal. Ct. App. 1995);
Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc. 770
N.E.2d 177 (Ill. 2002); Hemar Ins. Corp. v. Ryerson, 108 S.W.3d 90
(Mo.App. 2003); Nez v. Forney, 783 P.2d 471 (N.M. 1989); Fin.
Bancorp. Inc. v. Pingree & Dahle, Inc., 880 P.2d 14 (Ut. Ct.
App. 1994). For other procedural issues, see, e.g.,Maddox
v. American Airlines, Inc., 298 F.3d 694 (8th Cir. 2002)
(prejudgment interest); Weatherby Assoc., Inc. v. Ballack,
783 So.2d 1138 (Fla. Dist. Ct. App. 2001); North Bergen Rex
Transport v. Trailer Leasing Co., 730 A.2d 843 (N.J. 1999)
For the difficulties in drawing this distinction in conflicts law,
& von Mehren,supra note 31, at 56–66.
Walter Wheeler Cook, The
Logical and Legal Bases of the Conflict of Laws 166 (1942).
Section 187 of the Restatement (Second) provides that the parties’
choice of law will be honored if the state of the chosen law has a
substantial relationship to the parties or the transaction, or there
is an other reasonable basis for the parties’ choice. Restatement
(Second) of Conflict of Laws, supra note 54, at
SeeLa. Civ. Code
Ann. art. 3540 (2007), and Puerto Rico Draft Code,
supra note 28, at art. 34; see also the conventions
and codifications cited infra notes 119, 120.
Cases refusing to enforce a choice-of-law clause on the sole ground
that the chosen state lacked a substantial relationship are rare,
but they do exist. See Curtis 1000, Inc. v. Youngblade, 878
F. Supp. 1224 (N.D. Iowa 1995) (anti-competition clause in an Iowa
employment contract that contained a choice of Delaware law—chosen
law not applied because Delaware had no substantial relationship to
contract and because the chosen law would be repugnant to a
fundamental policy of Iowa); CCR Data Sys., Inc. v. Panasonic
Commc’n & Sys. Co., 1995 WL 54380 (D. N.H. 1995)
(choice-of-law clause not upheld because chosen state had no
relationship with the contract or the parties); Robinson v.
Robinson, 778 So.2d 1105 (La. 2001) (one spouse’s brief residence
in a state insufficient connection for a choice-of-law clause
pointing to that state in a contract regarding the division of
marital property, even though the Louisiana codification does not
require the presence of such a connection); Sentinel Indus.
Contracting Corp. v. Kimmins Indus. Serv. Corp., 743 So.2d 954
(Miss. 1999) (refusing to enforce a Texas choice-of-law clause in a
contract providing for the dismantlement of an Exxon ammonia plant
located in Mississippi and for its shipment and reassembly in
Pakistan); Cable Tel Serv., Inc. v. Overland Contracting, Inc.,
2002 WL 31817600 (N.C.App. 2002).
For example, neither the Rome Convention nor the Inter-American
Convention require “internationality.” See Rome
Convention, supra note 44, at art. 3; Inter-American
Convention, art. 7. For the rare case that foreign law is chosen for
a local transaction, the Rome Convention, supra note 44, at
art. 3(3), provides that the stipulation is limited by the mandatory
rule of the place of the transaction (whether or not it is the
U.C.C. 1-301(c) (2001 Rev.). U.C.C. 1-301(c)(1),(2) differentiate
between domestic (i.e., inter-U.S. transactions) and international
transactions, respectively. Neither provision requires that a
relation between the transaction and the state whose law is
stipulated in the clause, but U.C.C. 1-301(c)(1) requires that the
chosen state be a state of the United States. For consumer
contracts, U.C.C. 1-301(e) requires that the chosen state bear a
reasonable relation to the transaction.
For the various options, see Symeon
C. Symeonides, Wendy C. Perdue & Arthur T. von Mehren, Conflict
of Laws: American, Comparative, International 324-28 (1st ed.
The fact that section 81.125 does not contain a cross-reference to
section 81.135 is an oversight.
With regard to issues or performance, section 81.125 itself defines
the lex causae as the law of the state where the act is to be
performed under the contract. Or.
Rev. Stat. § 81.125(1)(a), (b) (2005).
Borchers & Symeonides,supra note 16, at 979–980;
Symeon C. Symeonides, The Judicial Acceptance of the Second
Conflicts Restatement: A Mixed Blessing, 56 Maryland
L. Rev. 1246, 1260 (1997).
Restatement (Second) of
Conflict of Laws, supra note 54, at
If any difference between the lex causae and the chosen law
would be allowed to defeat the parties’ choice, then party
autonomy would become a specious gift. As one court said, “[t]he
result would be that parties would have the right to choose the
application of another state’s law only when that state’s law is
identical to [the lex causae]. Such an approach would be
ridiculous.” Cherokee Pump & Equip., Inc. v. Aurora Pump, 38
F.3d 246, 252 (5th Cir. 1994); see also Bethlehem Steel Corp.
v. G.C. Zarnas & Co., 498 A.2d 605 (Md. 1985). Thus, there is a
general consensus on the need for a higher public policy threshold
for multistate contracts than for fully domestic contracts.
Predictably however, the various systems differ in defining this
The Restatement (Second) does not attempt to define the meaning of
the term “fundamental” but it provides a few examples of rules
that embody a fundamental policy, such as statutes declaring certain
contracts illegal or designed to protect one party from “the
oppressive use of superior bargaining power” such as statutes
protecting insureds against insurers. Restatement
(Second) of Conflict of Laws, supra note 54, at§ 187(2) cmt. g. The Restatement also provides examples of
rules that do not embody a fundamental policy, such as statutes of
frauds, rules “tending to become obsolete,” and “general rules
of contract law, such as those concerned with the need for
consideration.” Id. The Restatement also states that, to be
fundamental in the sense of section 187(2)(b), a policy need not be
as strong as the policy that justifies a refusal to apply foreign
law under the traditional ordre public exception. Id.
For a recent Oregon case expressing serious misgivings about one’s
ability to define a “fundamental” policy, see Machado‑Miller
v. Mersereau & Shannon, LLP, 43 P.3d 1207, 1211 (Or. App.
2002) (“To announce that a policy or a right is ‘fundamental’
is to announce a conclusion and not a premise, and the reasoning
that leads to the conclusion is almost always obscure, hopelessly
subjective, or expressed in verbal formulations that are of little
help . . . Further, whether a particular interest is deemed
‘fundamental’ under such indeterminate formulations depends on
the level of generality at which the Court chooses to identify it.
To the extent the interest is described at a high level of
generality, it is likely to be ‘fundamental,’ and vice versa.
Further, every piece of legislation, even the most apparently
trivial, implements and therefore indicates the presence of some
larger policy, which, in turn, serves an even larger one. A speed
limit is not itself a fundamental policy statement, but its purpose
is to promote highway safety, which is one way to protect the
health, welfare and safety of citizens, which is, of course, one of
the most fundamental of all public policies.”).
Formerly of the Oregon Supreme Court and currently a Distinguished
Jurist in Residence at Willamette University.
See J. H. C. Morris, The Proper Law of Tort, 64 Harv.
L. Rev. 881 (1951).
See James A.R. Nafziger, Oregon’s Conflicts Law
Applicable to Contracts, 38 Willamette
L. Rev. 397, 401–04 (2002) (describing section 81.130 as
“designed to attain several stipulated objectives of material
justice” and describing the Oregon Act as “a comprehensive
framework of rules for determining the appropriate law, as a matter
of material justice”); see also id. (“The Act offers a
guiding hand toward stability of expectations and material
See Symeon C. Symeonides, Louisiana’s New Law of Choice
of Law for Tort Conflicts: An Exegesis, 66 Tul.
L. Rev. 677, 689–92 (1992) (explaining the symbolism of the
catch-phrases used in the Louisiana and Puerto Rico codifications,
as well as in European codifications).
For a description and discussion of these methodologies, see
Symeonides, The Choice-of-Law
Revolution,supra note 2, at 13–35.
The tension between these two conceptions of conflicts law is
discussed in Symeonides, The
Choice-of-Law Revolution, supra note 2, at 404–411,
and Symeon C. Symeonides, Material Justice and Conflicts Justice
in Choice of Law, inInternational
Conflict of Laws for the Third Millennium: Essays in Honor of
Friedrich K. Juenger 125 (P. Borchers & J. Zekoll eds.
This part of section 81.130 is not a model of clarity. However, one
recognizes in it the remnants of the corresponding Louisiana and
Puerto Rico rules. For example, Art. 2 of the Puerto Rico Draft
Code, provides for “evaluating the strength and pertinence of
these policies in the light of: . . . the policies and needs of the
interstate and international systems, including the policies of
upholding the justified expectations of the parties and minimizing
the adverse consequences that might follow from subjecting the
parties to the law of more than one state”; while Article 36 lists
the policies of “facilitating the orderly planning of
transactions, promoting multistate commercial intercourse, and
protecting one party from undue imposition by the other.” Puerto
Rico Draft Code, supra note 28, at art. 2, 36.
For an extensive discussion of these limits, see Symeon
American Private International Law (forthcoming 2008).
This is a remnant from the “least impairment” principle of the
Louisiana codification. SeeLa.
Civ. Code Ann. arts. 3515, 3537, 3542 (1994).
Weintraub, Commentary on the Conflict of Laws 355 (4th ed.
2001) (describing his approach and the approach of the Louisiana
codification as “consequence-based approaches”). For a
discussion of this feature of the approach of the Louisiana
codification, see Symeonides, Louisiana Conflicts Law: Two
“Surprises,” supra note 23, at 523–24.
One result of this analysis is the possibility that the laws of
different states may be found applicable to different issues in the
same dispute. This phenomenon, known in American conflicts
literature by its French name of dépeçage, is not as
anomalous as it might seem to the uninitiated and is a common
occurrence in American conflicts practice. SeeSymeonides,
The Choice-of-Law Revolution, supra note 2, at 103.
However, the uncritical use of dépeçage may occasionally
result in an unprincipled eclecticism that distorts the policies of
the involved states. Fortunately, the flexible language of section
81.130 enables alert judges to avoid unprincipled eclecticism. For a
test for distinguishing a permissible from an inappropriate
dépeçage, see Symeonides,
Perdue & von Mehren, supra note 31, at 260–61.
See Olshen v. Kaufman, 385 P.2d 161 (Or. 1963). Olshen
involved identical facts and the same spendthrift as Lilienthal,
except that the creditor was an Oregonian and the contract was made
in Oregon. The court held the contract invalid under Oregon’s
Revolution, supra note 2, at 21–22, 369–370, 391.
See, e.g., Sims Snowboards, Inc. v. Kelly, 863 F.2d 643 (9th
Cir. 1988); Manz v. Cont’l Am. Life. Ins. Co., 843 P.2d 480 (Or.
1992), modified, 849 P.2d 549 (1993); Citizens First Bank v.
Intercontinental Express, Inc., 713 P.2d 1097 (Or. 1986); Kubeck v.
Consol. Underwriters, 517 P.2d 1039 (Or. 1974); Casey v. Manson
Constr. & Eng’g Co., 428 P.2d 898 (Or. 1967).
See Puerto Rico Draft Code, supra note 28, at art.
37; Rome Convention, supra note 44, at art. 4(2)-(5); EGBGB,
supra note 44, at art. 28(2)(5); and Swiss code, supra
note 44, at art. 117(2)-(3). For a comprehensive historical and
comparative discussion of presumptive rules in contract conflicts,
see Ole Lando, The Conflict of Laws of Contracts: General
Principles, 189 Hague
Academy Recueil des Cours 225, 338–46 (1984-VI).
See Symposium: Preparing for the Next Century A New
Restatement of Conflicts, 75 Ind.
L. J. 399 (2000) (containing an introduction by Gene R.
Shreve, articles by Friedrich K. Juenger, William M. Richman &
William L. Reynolds, Symeon C. Symeonides, and Louise Weinberg, and
commentaries by Patrick J. Borchers, Perry Dane, Michael H.
Gottesman, Alfred Hill, Harold G. Maier, Courtland H. Peterson,
Bruce Posnak, Mathias Reimann, William A. Reppy, Jr., Robert A.
Sedler, Linda J. Silberman & Andreas F. Lowenfeld, Gary J.
Simson, Joseph William Singer, Aaron D. Twerski, and Russell J.
Weintraub). This debate was initiated by the author in the previous
annual meeting, which celebrated the silver anniversary of the
Second Restatement. See Symeon C. Symeonides, The Judicial
Acceptance of the Second Conflicts Restatement: A Mixed Blessing,
56 Md. L. Rev. 1246,
See Symposium: American Conflicts Law at the Dawn of the
21st Century, 37 Willamette
L. Rev. 1 (2000) (containing articles by Symeon Symeonides,
Friedrich K. Juenger, Herma Hill Kay, Arthur T. von Mehren, Judge
Jack B. Weinstein, Russell Weintraub, and commentaries by Stanley E.
Cox, James A.R. Nafziger, Robert A. Sedler, Gene R. Shreve, and
Ralph U. Whitten); see also Jan Kropholler & Jan von
Hein, From Approach to Rule-Orientation in American Tort
and Justice in A Multistate World: Essays in Honor of Arthur T. von
Mehren 317 (J. Nafziger & S. Symeonides, eds. 2002).
See Courtland H. Peterson, New Openness to Statutory
Choice of Law Solutions, 38 Am.
J. Comp. L. 423, 423 (1990) (“We may be seeing a sea change
in the attitudes of American conflicts scholars with respect to the
use of statutes in solving conflicts problems.”).
Borchers & Symeonides, supra note 16, at105–110.
Choice-of-Law Revolution, supra note 2, at411–418, 422–437