Will a New Jersey court apply the law we chose?
Ordinarily yes: when the parties have agreed to be governed by the laws of a particular state, New Jersey courts will uphold the contractual choice if it does not violate New Jersey's public policy. New Jersey applies the Restatement (Second) of Conflict of Laws § 187 framework, so the choice fails where 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 where applying the chosen law would be contrary to a fundamental policy of a state with a materially greater interest that would supply the law absent the clause. For transactions inside the UCC, § 12A:1-301(a) separately requires that the transaction bear a REASONABLE RELATION to New Jersey and to the chosen state.
The trap
New Jersey's protective statutes are the fundamental policies that eat the clause. In Instructional Systems the Chancery Division held that New Jersey's interest in protecting its franchisees nullified a California choice-of-law provision, and the Supreme Court, applying Restatement § 187(b), concluded 'Although a close question, we do not believe that the trial court erred in applying New Jersey law to the dispute between the parties.' So a New Jersey-facing franchise relationship may be governed by the Franchise Practices Act despite a contrary governing-law clause, on a record like this one, which the Court itself called "a close question"; whether the same result follows for consumer (CFA, TCCWNA) or employment (LAD) relationships is a reasonable reading of the § 187(b) test, not something this rule verified. Note also § 12A:1-301(c): for several UCC provisions the Code itself specifies the applicable law, and a contrary agreement is effective only to the extent the law so specified permits.
11 authorities
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
Ordinarily, when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey courts will uphold the contractual choice if it does not violate New Jersey's public policy.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
That view is reflected in the Restatement (Second) of Conflicts of Laws § 187 (1969) ( Restatement ), which provides that the law of the state chosen by the parties will apply, 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 * * * would be the state of the applicable law in the absence of an effective choice of law by the parties.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
Although a close question, we do not believe that the trial court erred in applying New Jersey law to the dispute between the parties.
- statuteN.J. Stat. Ann. § 12A:1-301enactment date not established
The words that state the rule
a. 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 that other state or nation shall govern their rights and duties.
- statuteN.J. Stat. Ann. § 12A:1-301enactment date not established
The words that state the rule
b. In the absence of an agreement effective under subsection a. of this section, and except as provided in subsection c. of this section, the Uniform Commercial Code applies to transactions bearing an appropriate relation to this State. c. If one of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified: (1) section 12A:2-402; (2) sections 12A:2A-105 and 12A:2A-106; (3) section 12A:4-102; (4) section 12A:4A-507; (5) section 12A:5-116; (6) section 12A:8-110; (7) sections 12A:9-301 through 12A:9-307.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.decided 1992read it at the source ↗
The words that state the rule
the court recognized that the state in which the franchisee is located has a significant policy interest in governing the relations between the parties, and determined that the law of that state would apply rather than the law of the contractually-agreed-on forum.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
The Chancery Division issued a declaratory judgment that the relationship between the parties constituted a "franchise" and that that relationship was subject to the Act. The Chancery Division ruled first that the importance of New Jersey's interest in protecting its franchisees nullified the 1984 agreement's California choice-of-law provision.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
The judgment of the Appellate Division is reversed and the judgment of the Chancery Division is reinstated.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
As the New Jersey Act and the cases interpreting it make clear, New Jersey has a strong policy in favor of protecting its franchisees. In this case, New Jersey has significant "contacts" with the transaction. The franchisee is located here and the majority of ISI's employees reside in New Jersey. The franchise-specific investments, referred to below, relate primarily *346 to the assets in New Jersey and the goodwill developed for CCC by New Jersey residents. New Jersey would undoubtedly be the state of applicable law had no choice-of-law provision existed.
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
"Few franchises are intrastate," and were parties free to dispense with the protection afforded by franchise acts, any "large franchisor by insertion of a choice of law provision requiring the application of the franchisor's home state's law, could with a stroke of a pen remove the beneficial effect of the franchisee's state's remedial legislation." Winer Motors, supra, 208 N.J. Super. at 671-72 , 506 A. 2d 817 . "We will reject even the parties' choice of New Jersey local law in order to preserve the fundamental public policy of the franchisee's home state where its statutes afford greater protection." Id. at 672, 506 A. 2d 817
- case130 N.J. 324Instructional Systems, Inc. v. Computer Curriculum Corp.N.J.decided 1992read it at the source ↗
The words that state the rule
The court qualified its interpretation of New Jersey law to the extent that it actually conflicted with the law of sister-states. The record is sufficient to allow New Jersey law to apply.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.