Will an Iowa court apply the law our contract chooses?
Generally yes, under the Restatement (Second). In Cole v. State Automobile & Casualty Underwriters the Supreme Court held that "choice-of-law questions are now to be determined under the Restatement (Second) test: intent of the parties or the most significant relationship", and set out the two general rules: first, with certain restrictions, contracting parties can themselves determine the law which is to control; second, where the parties do not make the choice, the court applies the law of the jurisdiction with the "most significant relationship" to the transaction in dispute. Cole applied both tests and enforced the parties' choice of ANOTHER state's law against an Iowa insurer: "The insured, Jackie, and his agent, Poppen-hagen, plainly intended the insurance policy to be governed by Minnesota law.", "Under either test Minnesota law applies.. It follows that the trial court erred in determining that Iowa law should apply.", and the ruling for the defendants was reversed. Where the parties have made no effective agreement, § 554.1301(2) supplies the UCC's own default: "In the absence of an agreement effective under subsection 1, and except as provided in subsection 3, this chapter applies to transactions bearing an appropriate relation to this state." Within the Iowa UCC, § 554.1301(1) lets the parties agree that the law of Iowa or of another state or nation governs when the transaction bears a reasonable relation to Iowa and also to that other state or nation, but it opens "Except as otherwise provided in this section", and § 554.1301(3) is that exception: where one of eight listed provisions of the Iowa UCC specifies the applicable law, "that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified" (the list names §§ 554.2402, 554.4102, 554.5116, 554.8110, 554.9301 through 554.9307, 554.12507, 554.13105 and 554.13106, and 554.14107). Two Iowa statutes take specific contracts out of party choice: a provision of an in-state construction contract that makes the contract subject to the laws of another state is void and unenforceable as contrary to public policy (§ 537A.6(2)(a)), and the section does not stop at voiding the clause, "The laws of this state shall apply to every in-state construction contract" (§ 537A.6(3)), so Iowa law applies rather than whatever conflicts analysis would follow from striking the clause, and a choice-of-law clause in a computer information agreement selecting the law of a state that has enacted UCITA or a substantially similar law is voidable, with Iowa law applied instead, where the party against whom enforcement is sought is an Iowa resident or has its principal place of business in Iowa (§ 554D.125); the same section defines its own subject as "an agreement that would be governed by the uniform computer information transactions Act or substantially similar law as enacted in the state specified in the choice of laws provision if that state’s law were applied to the agreement."
The trap
Cole states the test and names the party-autonomy rule as subject to "certain restrictions not applicable here"; it does not set those restrictions out, and neither does this rule. The construction carve-out is the one that bites in practice, because § 537A.6 defines an in-state construction contract broadly: any agreement relating to construction, alteration, repair or maintenance of Iowa real property, including architectural, design, engineering, demolition, development and excavation agreements, and § 554.1301(1) is itself limited to transactions the Iowa UCC governs. A clause choosing another state's law in an Iowa construction contract is not merely disregarded; the statute calls it void and unenforceable as contrary to public policy.
13 authorities
- case296 N.W.2d 779Cole v. State Automobile & Casualty UnderwritersIowadecided 1980read it at the source ↗
The words that state the rule
We think it is clear that choice-of-law questions are now to be determined under the Restatement (Second) test: intent of the parties or the most significant relationship.
- case296 N.W.2d 779Cole v. State Automobile & Casualty UnderwritersIowadecided 1980read it at the source ↗
The words that state the rule
Under the second Restatement there are two general rules. First, with certain restrictions not applicable here, contracting parties can themselves determine the law which is to control.
- case296 N.W.2d 779Cole v. State Automobile & Casualty UnderwritersIowadecided 1980read it at the source ↗
The words that state the rule
The second rule applies where the parties do not make the choice. The court then applies the law of the jurisdiction with the “most significant relationship” to the transaction in dispute.
- statuteIowa Code § 554.1301enactment 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 either of this state or of such other state or nation shall govern their rights and duties.
- statuteIowa Code § 554.1301enactment date not established
The words that state the rule
If one of the following provisions of this chapter specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified: a. Section 554.2402; b. Section 554.4102; c. Section 554.5116; d. Section 554.8110; e. Sections 554.9301 through 554.9307; f. Section 554.12507; g. Sections 554.13105 and 554.13106; h. Section 554.14107.
- statuteIowa Code § 537A.6enactment date not established
The words that state the rule
A provision of an in-state construction contract is void and unenforceable as contrary to public policy if the provision does any of the following: a. Makes the in-state construction contract subject to the laws of another state. b. Requires any litigation, mediation, arbitration, or other dispute resolution proceeding arising from the in-state construction contract to be conducted in another state.
- statuteIowa Code § 537A.6enactment date not established
The words that state the rule
The laws of this state shall apply to every in-state construction contract.
- statuteIowa Code § 537A.6enactment date not established
The words that state the rule
As used in this section, “in-state construction contract” means a public, private, foreign, or domestic agreement relating to construction, alteration, repair, or maintenance of any real property in this state and includes agreements for architectural services, demolition, design services, development, engineering services, excavation, or any other improvement to real property in this state, including buildings, shafts, wells, and structures, whether on, above, or under real property in this state.
- statuteIowa Code § 554D.125enactment date not established
The words that state the rule
A choice of law provision in a computer information agreement which provides that the contract is to be interpreted pursuant to the laws of a state that has enacted the uniform computer information transactions Act, as proposed by the national conference of commissioners on uniform state laws, or any substantially similar law, is voidable and the agreement shall be interpreted pursuant to the laws of this state if the party against whom enforcement of the choice of law provision is sought is a resident of this state or has its principal place of business located in this state.
- case296 N.W.2d 779Cole v. State Automobile & Casualty UnderwritersIowadecided 1980read it at the source ↗
The words that state the rule
The insured, Jackie, and his agent, Poppen-hagen, plainly intended the insurance policy to be governed by Minnesota law.
- case296 N.W.2d 779Cole v. State Automobile & Casualty UnderwritersIowadecided 1980read it at the source ↗
The words that state the rule
The most significant relationship test also comes down in favor of Minnesota law. It was of no importance to the insured or his agent that the insurer’s home office was in Des Moines, Iowa. It was only a coincidence that the plaintiffs happened to be residents of Iowa. The policy was sold in a Minnesota transaction to a Minnesota resident by a Minnesota agent in order to establish an insurer-insured relationship in Minnesota. Under either test Minnesota law applies.. It follows that the trial court erred in determining that Iowa law should apply.
- statuteIowa Code § 554.1301enactment date not established
The words that state the rule
In the absence of an agreement effective under subsection 1, and except as provided in subsection 3, this chapter applies to transactions bearing an appropriate relation to this state.
- statuteIowa Code § 554D.125enactment date not established
The words that state the rule
For purposes of this section, a “computer information agreement” means an agreement that would be governed by the uniform computer information transactions Act or substantially similar law as enacted in the state specified in the choice of laws provision if that state’s law were applied to the agreement.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.