Will Alaska honor this contract's choice of another state's law?
Presumptively yes, but Alaska common law recognizes a real limit and the UCC section carries its own. For a UCC transaction, AS 45.01.301(a) lets the parties choose the governing law, "[e]xcept as otherwise provided in this section," "when a transaction bears a reasonable relation to this state and also to another state or nation." For contracts generally, Long v. Holland America Line Westours, Inc. adopted the Restatement (Second) of Conflict of Laws § 187(2) test: the chosen law applies even on an issue the parties could not have resolved by explicit agreement, "unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties."
The trap
This is not a theoretical override: Long applied it to strike down enforcement of a chosen state's law on the specific issue of a contractual limitations period, even though the chosen state (Washington) had a genuine, substantial relationship to the contract (the drafting party was headquartered there). The court found Alaska had a "materially greater interest" in uniform filing deadlines, in-state accident victims' access to its courts, and deterring in-state negligent conduct, and that enforcing the chosen law would offend those interests as "fundamental policy." A choice-of-law clause therefore does not guarantee the chosen state's substantive rules will govern every disputed issue in Alaska: particularly one Alaska courts treat as bound up with in-state litigants, in-state injuries, or in-state regulatory policy, as opposed to a purely private allocation-of-risk term between sophisticated commercial parties. The UCC side has a second, purely textual limit that operates before any policy analysis. Subsection (a) is expressly subject to the rest of the section, and subsection (c) hands seven code provisions precedence over the parties' choice: "[i]f one of the following provisions of the code specifies the applicable law, that provision governs, and a contrary agreement is effective only to the extent permitted by the applicable law specified by that provision," listing AS 45.02.402, AS 45.04.102, AS 45.05.116, AS 45.08.110, AS 45.12.105 and 45.12.106, AS 45.14.507 and AS 45.29.301 through 45.29.307. None of those seven was read for this rule, so a clause touching creditors' rights in sold goods, bank deposits, letters of credit, documents of title, leases, funds transfers or secured-transaction perfection needs them checked directly.
6 authorities
- statuteAS 45.01.301enactment date not established
The words that state the rule
Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law of this state or of the other state or nation shall govern the parties' rights and duties.
- statuteAS 45.01.301enactment date not established
The words that state the rule
If one of the following provisions of the code specifies the applicable law, that provision governs, and a contrary agreement is effective only to the extent permitted by the applicable law specified by that provision: (1) AS 45.02.402 ; (2) AS 45.04.102 ; (3) AS 45.05.116 ; (4) AS 45.08.110 ; (5) AS 45.12.105 and 45.12.106; (6) AS 45.14.507 ; (7) AS 45.29.301 — 45.29.307.
The words that state the rule
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
The words that state the rule
The superior court correctly concluded that Holland America had a substantial relationship with the state of Washington because it was headquartered there and that was the location from which the contract was issued.
The words that state the rule
Alaska has three interests that are materially greater than Washington's: (1) establishing uniform filing deadlines; (2) ensuring that fair compensation is available for personal injuries occurring in Alaska; and (8) deterring negligent future conduct in the state.
The words that state the rule
Because this case raises fundamental policy issues that are materially more interesting to Alaska than Washington, Alaska law applies. Under our law, the limitations clause was unenforceable without a showing of prejudice.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.