Will a Rhode Island court apply the law we chose in the contract?
Generally yes, and in a construction contract, only for as long as the builder lets it stand. “Rhode Island has long acknowledged that parties may choose the law that will govern their contractual disputes” (Commerce Park Realty, LLC v. HR2-A Corp.), and “choice-of-law provisions are enforceable if the intention of the parties to stipulate to the jurisdiction is made clear by express language or by the ‘facts and circumstances attending the making of the contract’” (Webster Bank, National Association v. Rosenbaum). Two limits run with the clause: “Barring certain circumstances, Rhode Island will not apply the law of the chosen state if it contravenes fundamental public policy”, and it “will not apply the law of the chosen state if ‘the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice’”. The choice must be of “a jurisdiction which has a real relation to the contract” (Sheer Asset Management Partners v. Lauro Thin Films, Inc.). A third limit is statutory and construction-specific: under R.I. Gen. Laws § 6-34.1-1(a), where a contract “is principally for the construction or repair of improvements to real property located in Rhode Island” and contains a provision making it “subject to the law of another state; to litigation in the courts of another state; or to arbitration in another state; that provision is voidable by the party that is obligated by the contract to perform the construction or repair.” With no effective choice, the authorities located here give two answers and Webster Bank prints both without resolving them: “the state law that governs a transaction is the state that ‘has the most significant relationship to the transaction’” under Restatement (Second) § 188 (Commerce Park Realty), and, per DeCesare, “the law of the state where the contract was executed governs”, because “[f]or contract cases, this Court has not adopted a definitive analysis.” Procedure stays local either way: “We apply our own procedural law, however, ‘even if a foreign state’s substantive law is applicable’” (DeFontes v. Dell, Inc.).
The trap
Do not carry Rhode Island’s famous interest-weighing test into a contract question as though it were settled. Woodward v. Stewart adopted it for TORTS (“justice will be more equitably administered if the Rhode Island courts apply that rule to tort conflicts cases coming before them”), and Webster Bank says in terms that for contract cases the Court has adopted no definitive analysis. Second, the substantial-relationship showing is not the formality it looks like: in Webster Bank “the trial justice concluded that Connecticut had ‘very little relationship to this matter, other than the fact that the bank may be headquartered there’”, “declined to enforce the choice-of-law provision”, and the Supreme Court said “We agree with this outcome.” Third, § 6-34.1-1 is VOIDABLE, not void: the foreign-law clause governs until the performing party avoids it, and only that party can, so a Rhode Island owner or a general contractor suing its out-of-state designer gets nothing from the section. Read its carve-outs before relying on it. Section 6-34.1-1(b) says the contract qualifies only where a party’s “principal obligation” is to provide labour or labour and materials “as a general contractor or subcontractor”; § 6-34.1-1(c) takes out a partnership or entity agreement, a loan or credit agreement in which the borrower promises to build, and a property-management agreement; § 6-34.1-1(d) says those lists “are not an exclusive list”; and § 6-34.1-1(e) gives the Rhode Island Superior Court “exclusive jurisdiction in relation to the construing or enforceability of § 6-34.1-1”, so a clause sending the dispute elsewhere does not take the § 6-34.1-1 question with it. And no Rhode Island decision located has ever applied § 6-34.1-1: the only opinion that mentions it recites the argument in a footnote and then declines to reach it, because at oral argument National's counsel “failed to articulate any disparity between the law of these jurisdictions”. Note too that Webster Bank, after saying the Court has adopted no definitive contract analysis, records that “in Harodite, this Court broadly stated that, “[w]ith respect to choice of law questions, this Court has adopted the ‘interest-weighing’ approach””, so the two statements sit side by side in the same opinion, and Commerce Park's own separate writing would have given the chosen state's law effect.
27 authorities
The words that state the rule
Rhode Island has long acknowledged that parties may choose the law that will govern their contractual disputes.
The words that state the rule
no stipulations of the parties as to the law they intend to have govern their contract will be given effect to, if it is considered to be contrary to the public policy of the law of the forum.
The words that state the rule
In accordance with § 188 of the Restatement (Second) Conflict of Laws, in the absence of an effective choice-of-law provision, the state law that governs a transaction is the state that “has the most significant relationship to the transaction.”
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Generally, in Rhode Island, “parties are permitted to agree that the law of a particular jurisdiction will govern their transaction.”
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
This Court previously has held that choice-of-law provisions are enforceable if the intention of the parties to stipulate to the jurisdiction is made clear by express language or by the ‘facts and circumstances attending the making of the contract
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Barring certain circumstances, Rhode Island will not apply the law of the chosen state if it contravenes fundamental public policy.
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Rhode Island also will not apply the law of the chosen state if “the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice.”
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
In conducting a choice-of-law analysis for tort cases, we have looked to the “interest-weighing” approach. See, e.g., Harodite Industries, Inc., 24 A.3d at 534. For contract cases, this Court has not adopted a definitive analysis.
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
In DeCesare, we held that “[i]n the absence of a contractual stipulation about which law controls, Rhode Island’s conflict-of-laws doctrine provides that the law of the state where the contract was executed governs.”
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
the trial justice concluded that Connecticut had “very little relationship to this matter, other than the fact that the bank may be headquartered there.”
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Therefore, the trial justice declined to enforce the choice-of-law provision and proceeded to conduct an interest-weighing analysis, finding that most of the policy-based factors tipped in favor of applying Rhode Island law. We agree with this outcome.
- case731 A.2d 708Sheer Asset Management Partners v. Lauro Thin Films, Inc.R.I.decided 1999read it at the source ↗
The words that state the rule
the right of parties to a contract to have their reciprocal duties and obligations under that contract governed by the law of some particular jurisdiction is limited to the selection or stipulation by them of the law of a jurisdiction which has a real relation to the contract.
- case731 A.2d 708Sheer Asset Management Partners v. Lauro Thin Films, Inc.R.I.decided 1999read it at the source ↗
The words that state the rule
Accordingly, we will not interfere with the agreement of two commercial entities to designate a particular jurisdiction to govern the transaction, so long as that jurisdiction has a real relation to the contract. Therefore, Lauro’s appeal is denied and dismissed.
The words that state the rule
We apply our own procedural law, however, “even if a foreign state’s substantive law is applicable.”
The words that state the rule
The interest-weighing approach to conflict of law cases is indeed the better rule, and justice will be more equitably administered if the Rhode Island courts apply that rule to tort conflicts cases coming before them. All prior cases that are inconsistent with this view are hereby overruled.
- statuteR.I. Gen. Laws § 6-34.1-1enactment date not established
The words that state the rule
If a contract is principally for the construction or repair of improvements to real property located in Rhode Island and the contract contains a provision that makes the contract or any conflict arising under it subject to the law of another state; to litigation in the courts of another state; or to arbitration in another state; that provision is voidable by the party that is obligated by the contract to perform the construction or repair.
- statuteR.I. Gen. Laws § 6-34.1-1enactment date not established
The words that state the rule
A contract is principally for the construction or repair of improvements to real property located in Rhode Island if the contract obligates a party, as its principal obligation under the contract, to provide labor, or labor and materials, for the construction or repair of improvements to real property located in Rhode Island as a general contractor or subcontractor.
- statuteR.I. Gen. Laws § 6-34.1-1enactment date not established
The words that state the rule
(1) The contract is a partnership agreement or other agreement governing an entity or trust; (2) The contract provides for a loan or other extension of credit and the party promising to construct or repair improvements does so as part of its agreements with the lender or other extender of credit; or (3) The contract is for the management of real property or improvements and the obligation to construct or repair is part of that management.
- statuteR.I. Gen. Laws § 6-34.1-1enactment date not established
The words that state the rule
Subsections (b) and (c) of this section are not an exclusive list of situations in which a contract is or is not principally for the construction or repair of improvements to real property located in this state.
- statuteR.I. Gen. Laws § 6-34.1-1enactment date not established
The words that state the rule
The superior court of the state of Rhode Island shall have exclusive jurisdiction in relation to the construing or enforceability of § 6-34.1-1.
- case942 A.2d 968National Refrigeration, Inc. v. Standen Contracting Co.R.I.decided 2008read it at the source ↗
The words that state the rule
plaintiff argues that under G.L. 1956 § 6-34.1-1, which was amended in 2006, a choice-of-law provision is voidable by the party performing an improvement to real property and thus Rhode Island law is controlling.
- case942 A.2d 968National Refrigeration, Inc. v. Standen Contracting Co.R.I.decided 2008read it at the source ↗
The words that state the rule
Thus, the choice-of-law provision in the contract does not disturb the summary-judgment ruling.
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Nevertheless, in Harodite, this Court broadly stated that, “[w]ith respect to choice of law questions, this Court has adopted the ‘interest-weighing’ approach.” Harodite Industries, Inc., 24 A.3d at 534 (citations omitted).
- caseNo. 2020-117-Appeal. (PC 16-60) (R.I. Feb. 16, 2022)Webster Bank, National Association v. RosenbaumR.I.decided 2022
The words that state the rule
Conclusion For the reasons set forth in this opinion, we affirm the judgment of the Superior Court. The papers in this case may be remanded to the Superior Court. 5 In a different case, we might opt to re-examine our choice-of-law rules for statutes of limitation.
The words that state the rule
The question that this Court must resolve is whether, under the circumstances of this case, the State of Rhode Island has a materially greater interest than the Commonwealth of Massachusetts in determining whether HR4-A has exceeded the statutory maximum interest provisions of the usury statute.
The words that state the rule
Justice Robinson, concurring in part and dissenting in part. I am pleased to concur in the entirety of the Court’s well-analyzed and well-articulated opinion in this case with the sole exception of its ruling as to the choice of law issue. Where I part company with the majority is in its conclusion that “[b]ecause the case at bar involves purportedly usurious loans—which loans Rhode Island has a strong policy against—a determination that the loans in question are not usurious because of the application of Massachusetts law, as opposed to Rhode Island law, would be contrary to a fundamental public policy of Rhode Island.” Quite simply, it is my opinion that Rhode Island’s public policy with respect to usurious loans does not rise to the level of being fundamental. I think it should be self-evident that, if such a public policy were truly fundamental, the General Assembly would not have voted to provide an exception to this state’s usury law with virtually no public controversy. To my mind, the fact that G.L. 1956 § 6-26- 2(e) was enacted by our democratically elected General Assembly is conclusive - 30 - evidence of how decidedly not fundamental the public policy with respect to usury is in Rhode Island. As such, in accordance with Restatement (Second) Conflict of Laws § 187 (1971), the $4 million loan and the $350,000 loan should be governed by Massachusetts law (not by Rhode Island law), in accordance with the choice of law provisions explicitly provided in the pertinent loan documentation. Accordingly, I record my respectful dissent. I believe that the agreed-upon choice of law provision should control.
- case942 A.2d 968National Refrigeration, Inc. v. Standen Contracting Co.R.I.decided 2008read it at the source ↗
The words that state the rule
At oral argument, the parties addressed the choice-of-law issue. Upon being questioned about any differences between the governing Rhode Island and Massachusetts law, counsel *974 for National failed to articulate any disparity between the law of these jurisdictions.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.