The choice-of-law question depends on the nature of the dispute, the contract terms, and the laws governing the choice of law.
If the dispute relates to a contractMany contracts specify the governing law. The courts will often honor the choice-of-law provisions, with some exceptions. If the contractual relationship has no connection to the state, the choice-of-law rules of a particular state may override the contractual choice of law.
If the contract does not have a choice-of-law provision, the court will apply the choice-of-law rules of the state where it sits. The choice-of-law rules can be found in the case law or in statutes. Those choice-of-law rules typically consider which state has more connection to the contract, where the contract should be performed, the place of contracting, the location of the subject, where the parties are incorporated or headquartered, and other factors.
Does CISG apply?CISG is the UN Convention on Contracts for the International Sale of Goods. It applies only to sale of goods between parties whose places of business are in different countries. Distributorship agreements are not contracts for the sale of goods. However, specific sales between the supplier and distributor may be subject to CISG. The U.S. is a signatory to CISG.
The CISG may apply if:
- the contract does not have a choice-of-law provision,
- the contract does not opt out of CISG,
- the contract concerns the sale of goods,
- the contract is between businesses from different countries,
- the parties are from countries who are CISG signatories (or at least one country is a CISG signatory + (1) the private international law indicates application of CISG or (2) the contract itself makes CISG applicable law).
Please consult with an attorney to determine which law applies to the dispute.
If the dispute relates to non-contractual claimsEven if the claims are non-contractual (such as fraud, conversion, negligence, or unfair competition), some contracts may still specify the governing law for those situations. But this will depend on the interpretation of the choice-of-law provision and the specific facts of the case.
If the contractual choice-of-law is found inapplicable, the court will apply the choice-of-law rules of the state where it sits, which may depend on various factors. For example, the court may look at the connection of the dispute to the state, where the events took place, where the losses or injury were sustained, and where the parties are located.