to: users of twerski and cohen, choice of law

MEMORANDUM To: Users of Twerski and Cohen, Choice of Law From: Professors Aaron D. Twerski and Neil B. Cohen Re: Introducing the Draft Restatement (Third) of Conflict of Laws

We are writing to update you about the most important current development regarding choice of law – the preparation of the American Law Institute’s Restatement of the Law, Third, Conflict of Laws. The project is still in its early stages. Preliminary drafts of some portions of the proposed new Restatement have been prepared and circulated to advisors to the Reporters and the ALI Council has approved three of the proposed 15 chapters, but no portion of the draft Restatement has yet been the subject of a Tentative Draft submitted to ALI members for approval. In this memo, we present some of the draft provisions of the new Restatement in the context of materials in our book, particularly with respect to choice of law for torts, the subject of the most well-developed drafts to date. We also present some of the draft provisions of the new Restatement relating to contracts that are not governed by a choice of law clause.

The first portion of this memo consists of the most important draft provisions relating to torts (§§ 6.01, 6.02, 6.03, 6.05, 6.06, 6.07, and 6.10) and contracts not governed by a choice of law clause (§§ 8.01, 8.05-8.10). These provisions are copyrighted by The American Law Institute and reprinted here with permission. Please note that these draft provisions have not been approved by the Council and membership of The American Law Institute, and therefore do not represent the position of the Institute on any of the issues with which they deal.

The second portion of this memo, starting on page 18, consists of a brief examination of the how of the new provisions would apply in the context of many of the principal cases in the casebook. In that examination, references to the draft new Restatement are in the form “R3 § 6.02.”

Users of Twerski and Cohen Casebook 2

§ 6.01. Conduct Regulation and Loss Allocation (1) Conduct-regulating rules, in the tort context, are rules whose primary purpose is

to impose liability for conduct deemed socially undesirable or absolve actors from liability on the grounds that their conduct was not socially undesirable.

(2) Loss-allocating rules, in the tort context, are rules whose primary purpose is to assign loss among relevant parties on the basis of considerations other than the mere wrongfulness of conduct. Comment:

a. Conduct regulation and loss allocation. The distinction between conduct-regulating and loss-allocating rules may be phrased in various different ways. Often it is described in terms of the purpose or effect of the rule. Conduct-regulating rules, on this understanding, have the purpose and effect of regulating conduct, while loss-allocating rules have the purpose and effect of distributing losses after torts occur. It is important to understand, however, that the distinction neither implies nor depends upon the claim that particular rules solely affect conduct or distribute losses, nor that they have only a single purpose. Charitable immunity, for instance, is generally considered loss-allocating, but it does presumably affect the conduct of charities and is intended to do so: it makes them more willing to engage in charitable activities because they need not bear the costs of their negligence. Likewise, the designation of conduct as wrongful or not, generally considered conduct-regulating, clearly allocates loss because it requires a wrongdoer to compensate a victim.

Phrasing the distinction in terms of the purpose of the rule works slightly better if the question is whether the rule is intended to encourage or discourage the precise conduct at issue, or whether it is intended to affect the degree of care exercised by an actor. Charitable immunity is not intended to encourage negligence by charities, so, in a suit based on alleged negligence, it would be reasonable to conclude that the purpose of such an immunity was not to regulate the alleged conduct.

Alternatively, the distinction may be understood not as a claim about the intent or effect of a given rule but rather as a claim about the judgment underlying the adoption of the rule. A conduct-regulating rule reflects a judgment that certain conduct is socially desirable or undesirable and for that reason designates the conduct as innocent or wrongful. A loss-allocating rule reflects a judgment that, regardless of the undesirability of certain conduct, the losses should be allocated among the parties in a way that departs from a regime under which a wrongdoer pays full compensation to the injured party. (For the purposes of distinguishing between loss-allocating and conduct-regulating rules, this regime may be understood as the default structure of tort law. A rule that departs from this regime for reasons unrelated to the wrongfulness of conduct is likely to be a loss-allocating rule.) The language of § 6.01 is intended to suggest both methods of understanding the distinction.

Sections 6.02 and 6.03 of this Chapter provide nonexclusive lists of issues deemed loss-allocating or conduct-regulating based on the preceding principles and the practice of courts. Characterization of some rules, such as charitable immunity, is relatively straightforward and widely accepted. Other rules, such as strict liability or contributory negligence, are harder to characterize. They may be understood in different ways; they may have multiple purposes. In such cases, and in the case of rules not explicitly characterized in this Restatement, identifying the primary purpose of a rule or a clear trend of judicial practice may be enough. Many sorts of characterization encounter difficult cases; that does not mean the underlying distinctions are not


useful. The point of the loss-allocating/conduct-regulating distinction is to facilitate the identification of the state whose law is most appropriate, and the distinction should be understood as a means to that end. Fundamentally, the question is simply whether the rule is one for which territorial connecting factors, such as the place of conduct or injury, are more important (a conduct-regulating rule), or whether it is one for which personal connecting factors, such as domicile, are more important (a loss-allocating rule).

Illustrations: 1. State X internal law provides immunity to charities for tort claims based on negligence;

State Y law does not. This immunity is not based on a judgment that negligent torts by charities are socially desirable, and it does not have the purpose of encouraging such negligence. Instead, it is based on the judgment that charitable works are sufficiently desirable that the losses occasioned by charities’ negligence should remain with the injured parties. This charitable immunity is a loss-allocating rule.

2. State X recognizes a cause of action for negligent infliction of emotional distress; State Y does not. The absence of the cause of action under State Y law reflects a judgment that negligent infliction of emotional distress is not sufficiently wrongful to support liability. The existence and nonexistence of the cause of action are conduct-regulating rules.

3. State X recognizes a cause of action for battery but allows self-defense as an affirmative defense. The judgment underlying this rule is that battery in self-defense is not sufficiently wrongful to support liability. The existence of self-defense as an affirmative defense is a conduct-regulating rule. § 6.02. Conduct-Regulating Rules

Conduct-regulating issues include, but are not limited to, the following: (a) standards of conduct or safety, (b) tortious character of conduct/interest entitled to legal protection, (c) strict liability, (d) punitive damages, (e) duty owed plaintiff, (f) legal cause, (g) defenses that negate wrongfulness, (h) requirements for liability, and (i) duty or privilege to act.

Comment: a. Standards of conduct or safety. The classification of standards of conduct and safety as

conduct-regulating is very common; indeed, the phrase “standards of conduct and safety” is sometimes used to designate the category of conduct-regulating rules. The greater difficulty is in deciding whether a particular rule constitutes a standard of conduct or safety. Rules governing the operation of automobiles, or requiring certain safety standards for worksites or other locations, are clear examples of conduct regulation. Statutes requiring or specifying certain standards of care are also conduct-regulating.

b. Tortious character of conduct/interest entitled to legal protection. Whether certain conduct is blameworthy, or whether a victim has suffered a legally cognizable injury, is a question


of conduct regulation. Limitations on the extent of recovery for a recognized wrong, by contrast, raise issues of loss allocation. See § 6.03(d).

c. Strict liability. Strict liability presents a difficult question of characterization. It could be described as imposing liability on the basis of something other than blameworthy conduct, which would make it sound loss-allocating. From another perspective, however, strict liability could be described as resting on a judgment that certain conduct causing injury is sufficiently blameworthy to justify liability regardless of the degree of care exercised. It could also be described as relating to the existence of an interest entitled to legal protection, bringing it more clearly within the conduct-regulating category. The majority view treats strict liability as conduct-regulating, and this seems sensible in terms of the outcomes prescribed by the rules of §§ 6.04 and 6.06. If the law of the selected state creates no liability (as the absence of a strict-liability rule will do for non-negligent conduct), there is no loss for any other state to allocate. Conversely, if the law of the selected state does create liability, another state’s absence of strict liability seems more like a determination that the defendant’s conduct was not wrongful than an attempt to shift loss back to the plaintiff for some other reason.

d. Punitive damages. Punitive damages are intended to punish defendants for especially blameworthy conduct. They are independent of the plaintiff’s loss and hence not an attempt to allocate that loss.

e. Duty owed plaintiff. Whether the defendant owes a duty to the plaintiff, and hence can be subjected to liability for breaching that duty, is an issue of conduct regulation.

f. Legal cause. Whether the defendant’s acts will be considered the legal cause of the plaintiff’s injury is an issue of conduct regulation.

g. Defenses that negate wrongfulness. Some defenses, such as immunities, allocate loss to the plaintiff despite the wrongfulness of a defendant’s conduct. Others, such as self-defense, reflect a judgment that the defendant’s conduct is not in fact wrongful. Whether, because of certain circumstances, conduct otherwise deemed blameworthy is in fact innocent is an issue of conduct regulation.

h. Requirements for liability. Laws that require specific acts or events as a prerequisite to liability are conduct-regulating.

i. Duty or privilege to act. An actor will sometimes be excused from liability for otherwise wrongful conduct on the grounds that some law required or privileged his action. Such laws are conduct-regulating because they relate to the wrongfulness of the actor’s conduct.

§ 6.03. Loss-Allocating Rules Loss-allocating issues include, but are not limited to, the following:

(a) charitable immunity, (b) intra-family immunities, (c) vicarious liability, (d) damages limitations, (e) joint and several liability, (f) contribution and indemnity among tortfeasors, (g) comparative and contributory negligence, (h) survival of actions, (i) guest statutes, and (j) workers’ compensation.


Comment: a. Charitable immunity. As noted in Illustration 1, the existence of charitable immunity

does not reflect a judgment that negligent torts by charities are socially desirable. Instead, it reflects a judgment that, for reasons unrelated to the wrongfulness or undesirability of such negligent torts (primarily the desirability of charitable activity), charities should not be required to bear the costs.

b. Intra-family immunities. An intra-family tort immunity, such as interspousal tort immunity, might be based on a few different judgments. It might be based on a view that because the marital couple constitute one legal person, an interspousal tort is simply impossible in the same way as a self-inflicted tort. With this justification in mind, the characterization of the rule as loss-allocating or conduct-regulating is not easy. The view of the marital couple as a single legal person is increasingly disfavored, however, and more current justifications support the view of intra-family immunity as loss-allocating. They include a desire to preserve marital harmony or parental authority and a desire to protect insurance companies from false claims. These justifications do not suggest that the injurious conduct is socially desirable but rather that the loss will remain with the injured party for other reasons.

c. Vicarious liability. Vicarious liability can be understood as having elements of conduct-regulation, in that sometimes liability is imposed on a third party at least partially in order to encourage that party to behave differently in order to prevent injuries. A car-rental agency, for instance, might be held liable for injuries caused by its vehicles in part in order to induce it to be more careful in vetting renters. An employer might be held liable for an employee’s torts in order to make the employer more closely scrutinize job applicants. However, there are conduct-regulating rules such as tort claims for negligent entrustment or negligent supervision and hiring that precisely target conduct determined to be wrongful. Vicarious liability shifts losses to a third party even in the absence of wrongful conduct by that party. Unlike strict liability, which is conduct-regulating, vicarious liability does not impose liability without fault based on a judgment that the underlying activity is inherently dangerous or that alternatives should be employed when possible. Its primary purpose is more frequently to ensure that liability falls on a party with the financial resources to satisfy a judgment. It is therefore better understood as loss-allocating.

d. Damages limitations. Caps on damages available, or the exclusion of certain kinds of damages such as pain and suffering, reflect a judgment that compensation should be limited, rather than a judgment that the conduct giving rise to liability is not wrongful. The existence or nonexistence of a protected interest, by contrast, is a question of conduct regulation. See § 6.02(b).

e. Joint and several liability. Rules about the extent to which tortfeasors may be held liable for injuries caused by more than one defendant serve to allocate loss among tortfeasors and to allocate the risk of defendant insolvency among the defendants and the plaintiff. These rules are not premised on the wrongfulness of conduct and are therefore loss-allocating rules.

f. Contribution and indemnity among tortfeasors. Like rules about joint and several liability, rules that determine the extent to which tortfeasors may recover from codefendants allocate loss among the tortfeasors and allocate the risk that one or more defendants may be insolvent among the defendants and the plaintiff. They are loss-allocating rules.

g. Comparative and contributory negligence. Rules that reduce or eliminate recovery based on the negligence of the plaintiff are somewhat difficult to characterize. They are presumably intended to affect the behavior of potential tort victims, and they might also be characterized as resting on a judgment about the relative wrongfulness of the defendant’s conduct. They do not,


however, reflect a judgment that the defendant’s negligence is socially desirable, and they are better characterized as loss-allocating.

h. Survival of actions. Rules that determine whether a tort claim survives the death of a tortfeasor or victim are not based on a judgment that survival affects the wrongfulness of the tortious conduct. Instead, they allocate losses among surviving parties and the estates or heirs of deceased parties.

i. Guest statutes. Statutes that limit or bar claims by automobile passengers against drivers are not intended to encourage negligence by drivers and do not reflect a judgment that such negligence is not blameworthy. Instead, like charitable immunity, they presumably reflect a judgment that the underlying activity (here, ride-sharing) is sufficiently desirable that those who engage in it should not be required to bear the full costs of their negligence. j. Workers’ compensation. Laws that bar tort recovery by workers because of the existence of a statutory compensation scheme are not based on a judgment that such injuries are socially desirable. Instead, the judgment is that the regulatory scheme reflects the appropriate distribution of loss. No-fault auto insurance is similar, as are most regulatory schemes that replace tort liability.

§ 6.04. Conduct Regulation: Conduct and Injury in Same State When conduct and injury occur in the same state, the law of that state will govern an

issue of conduct regulation.

Comment: a. Rationale. The rule that courts should apply the conduct-regulating rules of the state

where conduct and injury occurred is widely accepted. Because the purpose behind a conduct-regulating rule is generally to deter wrongful conduct and thereby prevent injuries, the state where conduct and injury occur will have the dominant interest in an issue of conduct regulation.

b. Conduct and injury in the same state. If states have the same rule of law for the issue under consideration, they may be treated as the same state for the purposes of this Section.

Illustration: 1. Anne acts in State X and causes injury to Brad in State Y. States X and Y have an

identical statute creating strict liability for Anne’s conduct but different laws governing punitive damages. The case may be analyzed as if conduct and injury occurred in the same state on the issue of strict liability but not on the issue of punitive damages.

c. Issue of conduct regulation. An issue of conduct regulation is presented any time the laws of the relevant states differ with respect to conduct regulation. It is not necessary for all states to have laws specifically addressing the issue. Selecting the law of a state that does not recognize a cause of action will generally mean that the plaintiff will not be able to recover.

§ 6.05. Conduct Regulation: Conduct and Injury in Different States When conduct in one state causes injury in another, the law of the state of conduct

will govern an issue of conduct regulation. However, if the location of the injury was foreseeable, the injured person may select the law of the state of injury. If the injured person selects the law of the state of injury for any issue, that law will govern every issue of conduct regulation presented by the same tort claim.


Comment: a. Rationale. Cross-border torts present more difficult questions than intrastate torts. The rule of this Section captures majority practice in a simple and predictable way. It also harmonizes with the treatment of some loss-allocation issues in cross-border cases, which helps in situations where characterization of an issue as conduct-regulating or loss-allocating is close or difficult.

Cross-border torts involving conduct-regulating issues may be further subdivided. There are two basic patterns: the victim may be favored by the law of the state of conduct (and the tortfeasor favored by the law of the state of injury), or the reverse. As to cases in the first pattern, judicial practice is fairly uniform. Courts generally conclude that the state of conduct has an interest in imposing liability for wrongful conduct within its borders, regardless of where the injury occurred. The state of injury, in contrast, typically has no interest in authorizing out-of-state conduct. Hence, such cases are often described as false conflicts, and the law of the state of conduct governs. (The analysis may be different in cases in which the state of injury actually seeks to encourage conduct directed towards that state. Products liability may be such an example; a state may wish to encourage out-of-state businesses to ship their goods into the state or to charge lower prices for in-state sales. Products-liability claims are subject to the more specific rules of §§ ___.) This Section adopts that rule, subject to a choice that is unlikely to be exercised. For cases in the second pattern, the conflict is starker. The state of conduct has an interest in authorizing conduct within its borders, but the state of injury has an interest in imposing liability. There is nonetheless a strong majority rule that in such cases, if the location of the injury is foreseeable, the law of the state of injury may govern. This Section adopts that rule but gives the choice to the injured party based on the assumption that the injured party will generally choose the law of the state of injury if that law is more favorable. The rule of this Section is phrased as a choice to spare the court the task of identifying more favorable law and to recognize the fact that in some rare cases an injured party may wish to choose the less favorable law of the state of conduct. In such circumstances, the state of injury is unlikely to have an interest in thwarting that choice. For discussion of party choice in tort cases more generally, see § 6.09. Granting choice to the injured party also harmonizes the treatment of cross-border conduct-regulation issues with the treatment of certain loss-allocation issues in cross-border split-domicile cases; see § 6.07. This uniform treatment will be valuable when characterization of issues is close or difficult. Comment b. Choice effective for every conduct-regulation issue presented by the same tort claim. Ordinarily, this Restatement prescribes a separate choice-of-law analysis for every issue in a case. See § 5.02 and Comment d. It thus contemplates the possibility that different issues related to the same claim will be decided under the laws of different states, a technique called dépeçage. While some uses of dépeçage are unproblematic, the technique also has the possibility to produce results that are contrary to the policy of all relevant states. Comment e to § 5.02 therefore instructs courts to be vigilant in their use of dépeçage. Allowing a party to select the law applicable to a particular issue raises the danger of inappropriate dépeçage, since a deliberate attempt to create the most favorable patchwork of laws for a party will often lead to results contrary to the policies of all relevant states. This Section therefore requires the injured party to select the law of the place of injury for every issue of conduct regulation presented by the same tort claim. Analysis of issues of loss allocation should be performed under the applicable rules, bearing in mind the limits on dépeçage set out in Comment e to § 5.02. Analysis of other claims should be performed under the rules applicable to those claims.


Illustrations: 1. Andrew, a state X domiciliary, signs up for a bus tour of states X and Y operated

by a charitable organization linked to state X. While in state Y, the bus is involved in an accident and Andrew is injured. Andrew sues the charity, alleging negligence in the hiring of the bus driver, who had been involved in several similar accidents before the charity hired him. The facts constitute negligent hiring under the law of state Y but not under the law of state X. Andrew may select the law of state Y to govern every issue of conduct regulation presented by his negligent-hiring claim.

2. Same facts as Illustration 1, provided further that state X law immunizes charities for negligent torts while state Y law does not. Andrew may select state Y law to govern every issue of conduct regulation presented by his negligent-hiring claim. The loss-allocating issue of charitable immunity will still be governed by the law of state X, pursuant to § 6.06. A separate choice-of-law analysis must be performed for any other tort claims Andrew may have against the charity.

§ 6.06. Loss Allocation: Shared Central Link

When the relevant parties share a central link to a single state, that state’s law will govern an issue of loss allocation.

Comment: a. Rationale. Because the policies behind a state’s loss-allocating rules are focused on

persons linked to that state, a state of shared domicile (or other central link) will have the dominant interest in the resolution of a loss-allocation issue. Although such cases are often described as false conflicts, i.e., cases where only one state has an interest in the outcome, the rule of this Section does not depend on the claim that no other state has a contrary policy or interest.

In cases in which the state of shared link allows recovery while the state where the tort occurred does not—for instance, because of a guest statute or charitable immunity—it is plausible to say that allowing recovery between two out-of-staters thwarts no policy of the state where the tort occurred. When the state of shared link precludes recovery, however, giving effect to that rule interferes with the locus state’s pro-recovery policy. The choice to give priority to the law of shared link is a sensible and widely accepted resolution of this conflict.

b. Relevant parties. In most cases, the relevant parties will be the victim and the tortfeasor. However, some rules, such as those concerning vicarious liability or contribution among tortfeasors, allocate loss among some other set of people. With respect to such rules, more or different parties may be relevant.

c. Shared central link. This Chapter uses “link” to describe the connection between a person and a state. This Restatement uses “central link” as an umbrella concept to identify the state that is the center of a natural person’s life or of a juridical person’s identity. See § 2.01. A natural person’s central link is presumed to be the state of domicile, but it may be the state of habitual residence or some other state in appropriate cases. See § 2.02. A central link is shared if it is the same state for the relevant parties or if the different states have the same law for the issue under consideration. See Restatement Second, Conflict of Laws § 145, Comment i (stating that when contacts in tort case are located in two or more states with the same law on a particular issue, “the case will be treated for choice-of-law purposes as if these contacts were grouped in a single state”).


Illustration: 1. Anne, a State X domiciliary, and Brad, a State Y domiciliary, are involved in a one-car

accident in State Z. Anne sues Brad. State X and State Y have an identical guest statute but different laws governing damages limitations. The case features a shared central link on the issue of the guest statute but not on the issue of damages limitation.

If the laws are not identical with respect to a particular issue, they do not count as the same. However, the extent to which laws are similar may be taken into account in determining whether some state’s law would be manifestly more appropriate than the law selected under the rules of this Restatement.

Illustration: 2. Same facts as Illustration 1, provided further that State X has a damages limitation of

$5000, State Y a damages limitation of $7500, and State Z no damages limitation. Section 6.03 of this Restatement directs the application of State Z law on the question of damages limitation. However, the similarity between the laws of the linked states suggests that either State X or State Y law will be manifestly more appropriate under § 5.03.

d. Issue of loss allocation. An issue of loss allocation is presented any time the laws of the relevant states differ with respect to loss allocation. It is not necessary for all states to have laws specifically addressing the issue.

Illustration: 3. Charles and Deborah, both State X domiciliaries, are involved in a one-car accident in

State Y. State X has a guest statute. State Y does not. Whether the X guest statute precludes recovery presents an issue of loss allocation.

§ 6.07. Loss Allocation: No Shared Central Link (1) When the relevant parties have central links to different states, and conduct and

injury occur in a single state, that state’s law will govern an issue of loss allocation.

(2) When the relevant parties have central links to different states, and conduct and injury occur in different states, the law of the state of conduct will presumptively govern an issue of loss allocation unless

(a) the injured person is linked to the state of injury, (b) the occurrence of injury in that state was objectively foreseeable, and (c) the injured person requests application of the law of the state of injury. (3) If the injured person requests application of the law of the state of injury for any

issue, that law will govern every issue of loss allocation presented by the same tort claim.

Comment on Subsection (1): a. Torts internal to one state without a shared central link. As with the shared-link cases,

split-link cases can be further subdivided. First (the distinction between Subsections (1) and (2)), the tort might occur completely within one state, or it might be a cross-border tort. Cross-border torts are discussed in Comment b. Within the category of torts internal to one state, the cases may


be divided into three subcategories. First, the tort might occur in one of the parties’ linked states, and the law of that state favor the linked party. Second, the tort might occur in one of the parties’ linked states, and the law of that state favor the nonlinked party. Third, the tort might occur in a state with which neither party is linked. As to the first subcategory, when the conduct and injury occur in one party’s linked state and that state’s law favors the linked party, application of the law of the place of the tort is a reasonable way to resolve the conflict between the two states’ policies. This is true regardless of whether the linked party is the victim or the tortfeasor. A plaintiff should be able to rely on the protections of generally applicable home-state law with respect to in-state torts, even against a defendant from another state. (With respect to States of the United States, such defendants are protected by the United States Constitution against some discrimination under the law of the State of the tort. Constitutional restrictions on choice of law are discussed in Chapter ___, § ___.) A defendant acting and causing injury at home should likewise be able to rely on the protections of home-state law, even against a plaintiff from another state. American courts overwhelmingly apply the law of the state of conduct and injury in such cases, as do many codifications. Illustrations: 1. Andrew, a State X domiciliary, is visiting State Y. A charitable organization

linked with State Y negligently inflicts injury on him. State Y has a charitable-immunity law; State X does not. State Y law will govern the issue of charitable immunity.

2. Same facts as Illustration 1, except that Andrew remains in State X and the charitable organization enters State X and injures him there. State X law will govern the issue of charitable immunity.

As to the second subcategory, when the conduct and injury occur in one party’s linked state and that state’s law disfavors the linked party, application of the law of the place of the tort is a reasonable resolution of the case. Again, this is true regardless of whether the linked party is the victim or the tortfeasor. Such cases are sometimes considered “unprovided-for” or “no-interest” cases on the theory that states have no interest in applying laws that will disadvantage their linked parties. However, there is a countervailing value of nondiscrimination that supports extending the benefits of local law to visiting out-of-staters unless a good reason exists for differential treatment. Additionally, in the situation when the loss-allocation law of the place of the tort favors recovery, application of that law furthers the state’s interest in deterring wrongful conduct. Application of the law of the place of the tort is a predictable and easily administrable rule. It is favored by most American courts and many codifications.

Illustrations: 3. Same facts as Illustration 1, except that State X has a charitable-immunity law

and State Y does not. State Y law will govern the issue of charitable immunity. 4. Same facts as Illustration 2, except that State X has a charitable-immunity law

and State Y does not. State X law will govern the issue of charitable immunity.

The third subcategory, in which conduct and injury occur in a state that is not the linked state of either party, is the most difficult. If the law of the place of the tort is the same as that of one of the parties’ linked states, the difficulty disappears, for such a case can be analyzed as if the conduct and injury occurred in that party’s linked state. See § 6.02, Comment c. If the law of the third state is substantially different, invocation of the § 5.03 escape clause may be appropriate. In


this category of cases, the distinction between the situation in which each party is favored by his or her linked state’s law and the one in which each party is disfavored may be significant. If each party is disfavored, no state has a substantial interest in the application of its loss-distribution rules. Application of the law of the state of conduct and injury is appropriate in such cases because of the value of nondiscrimination, which makes rights under the locus state’s law available to visitors from other states unless a good reason exists for differential treatment. However, if each party is favored by his or her home law, the state of conduct and injury likely has a lesser interest in the application of its rules of loss-allocation than either of parties’ linked states. In such circumstances, application of one linked state’s law may be manifestly more appropriate, based on additional contacts with that state.

Illustrations: 5. Brad, a domiciliary of State X, and Charlotte, a domiciliary of State Y, are

involved in a one-car accident in State Z. Charlotte, the passenger, sues Brad, the driver. All three states have limits on the damages recoverable in such actions. State Y sets the lowest limit, then State Z, then State X. State Y has no substantial interest in limiting the amount Charlotte can recover from a non-State Y domiciliary for an accident outside State Y. State X has no substantial interest in allowing a larger recovery against Brad on behalf of a non-State X domiciliary for an accident outside State X. State Z has at least some interest in making the benefits and obligations of its law available to visiting out-of-staters on a nondiscriminatory basis unless withholding them will further a policy of the out-of-staters’ homes. State Z law will govern the damages limitation.

6. Same facts as Illustration 5, except that State X’s limit is the lowest, then State Y, then State Z. State X has a substantial interest in limiting its domiciliary Brad’s liability. State Y has a substantial interest in compensating its domiciliary Charlotte. State Z’s interest in treating out-of-staters the same as it would treat Z residents is minimal in comparison. If, for instance, the trip originated and was intended to conclude in State X, State X law would be manifestly more appropriate.

Comment on Subsections (2) and (3): b. Cross-border torts with no shared link. This category of cases may also be further

subdivided. Most typically, the tortfeasor will act in her linked state and the victim receive injury in his. In such cases, courts tend to apply the law of the victim’s linked state if it is more favorable to the victim, especially if the place of injury was foreseeable. Subsection (2) allows for this possibility by authorizing a victim injured in his home state to select that state’s law. If the victim does not make that choice, it is not unreasonable to hold the tortfeasor to the standards of the state with which she is linked and where she acted. Doing so is unlikely to interfere with the policies of the victim’s state. (A possible exception to this analysis is products-liability claims, when the victim’s state may adopt a less-protective rule in order to encourage businesses to distribute their products in the state or to charge lower prices. Products-liability claims are subject to the more specific rules of § 6.10.) Subsection (2) gives the choice to the victim in order to spare the court the task of determining which law is more favorable.

If the tortfeasor acts in her home state and the victim receives injury in his, but the law of each state disfavors the linked party, the rule is the same. Subsection (2) provides that the law of the place of conduct is presumptively applicable, subject to a choice that is unlikely to be exercised. This presumption reflects the idea that the state where conduct occurred has some deterrent interest in imposing liability on an actor who violates its rules even if injury occurs elsewhere, while the


state of injury has a lesser interest in foreclosing recovery. The presumption accords with the weight of authority. It is phrased as a presumption, unlike most of the rules of this Restatement, to indicate that courts have greater freedom to depart from the rule in appropriate cases.

The presumptive rule also governs cases involving cross-border torts without a shared link where the conduct and injury occur in states not linked with the parties. Here, relevant authority is sparse and the presumption is at its weakest. Such cases are best resolved by a case-specific analysis that attempts to identify and accommodate the relative interests of the respective states and the expectations of the parties. Comment on Subsection (3): c. Choice effective for all loss-allocation issues presented by the same tort claim. Like § 6.05, this Section tries to minimize the danger of inappropriate dépeçage by requiring a party choosing the law of the place of injury to make that choice for all loss-allocation issues presented by the same tort claim. Analysis of issues of conduct regulation should be performed under the applicable rules, bearing in mind the limits on dépeçage set out in Comment e to § 5.02. Analysis of other claims should be performed under the rules applicable to those claims.

§ 6.08. Residual Rule For choice-of-law questions not explicitly provided for in this Restatement, a tort issue will be governed by the most appropriate law, determined by an assessment of the relevant policies of the forum and other interested states, the relative interests of those states in the particular issue, and the reasonable expectations of the parties.

Comment: a. Rationale. This Restatement sets out rules for tort choice-of-law questions based on the practice of courts and the decisions of codifiers. For some kinds of choice-of-law questions, there is insufficient authority to formulate a rule. Tort choice-of-law questions falling outside the rules of this Restatement should be resolved by selecting the law that is most appropriate in terms of the factors that make the choice of a particular state’s law sensible rather than arbitrary. These factors are the relevant policies of the forum and other interested states, the relative interests of those states in the particular issue (determined in light of the strength and relevance of the contacts between the states and the issue), and the protection of justified expectations. Determining the most appropriate law will require a case-specific analysis. b. Relevant policies of the forum and other interested states. For tort choice-of-law questions not resolved by one of its rules, this Restatement directs courts to select a governing law by considering the policies of the forum and other interested states and the reasonable expectations of the parties. Compare Restatement Second, Conflict of Laws § 6. The first step, then, is to decide which states are interested. This Restatement understands the question of whether a state is interested to be equivalent to the question of whether the facts of a case bring it within the scope of that state’s law. See § 5.01, Comment a. This is akin to the process undertaken in ordinary legal analysis within a single state: if one is seeking to determine which legal rule will govern an issue (as, for instance, between common law, or a statute, or an administrative regulation), the first step is to determine which of the rules actually speak to that issue on the facts of the case.

As the Restatement Second noted, the forum always has at least procedural interests. See Restatement Second, Conflict of Laws § 6, Comment e. Thus, if an issue is characterized as procedural, forum law will govern. For substance/procedure characterization generally, see § X. Whether an issue falls within the scope of a state’s substantive law is to be determined by asking


whether application of that law would promote the policies behind it. See Restatement Second, Conflict of Laws § 6, Comments e and f. It may be presumed that the scope of a state’s tort law includes all persons and events within the state’s borders, and events involving its domiciliaries or other linked parties outside its borders if application of the law would promote the policies behind the law. Promoting the policies behind the law will typically mean benefiting the state’s domiciliary or other linked party: a charitable immunity, for instance, would typically reach a case in which the defendant was a charity linked to the state, but not one in which the plaintiff was linked to the state while the defendant charity was not. See Restatement Second, Conflict of Laws § 6, Comment f (noting that “application of a state’s statute or common law rule which would absolve the defendant from liability could hardly be justified on the basis of this state’s interest in the welfare of the injured plaintiff”). States do, however, have the power to set the scope of their laws in ways that depart from this presumption. See § 5.01, Comment c; § 5.02, Comment b. c. Relative interests of those states. If an issue falls within the scope of more than one state’s law, the court must give priority to one law. See § 5.01, Comment e. This is to be done by assessing the relative interests of the states in application of their law and giving priority to the law of the state with the dominant interest, as long as doing so will not unduly upset the reasonable expectations of the parties. Compare Restatement Second, Conflict of Laws § 6, Comment f. Several factors may be used to determine the relative strengths of state interests. First, state interests tend to be stronger when states have more relevant contacts with a case. (Relevant contacts are those that relate to the purpose of the law under consideration.) Second, state interests tend to be stronger when the issue under consideration implicates a primary, rather than an ancillary, purpose of the relevant law. Third, the intensity of a state’s interest may in some cases be determined from an examination of its choice-of-law decisions: if a state would apply its own law to an issue in a particular case, its interest may be deemed stronger than if it would not. See Restatement Second, Conflict of Laws § 8, Comment k. A state’s interest in regulating conduct or redressing injury received inside its borders may be presumed stronger than an interest in regulating conduct or redressing injury received outside its borders. Thus, in a conflict between two conduct-regulating rules, the state where conduct and injury occur is likely to have the dominant interest. Determination of priority in cross-border torts is more difficult. It may be presumed, however, that a state with a territorial connection has a stronger interest in application of a conduct-regulating rule than a state with only a domiciliary connection.

A state’s interest in applying a loss-allocating rule may be presumed stronger when the case involves one or more persons linked to the state than when it does not. Thus, in a conflict between loss-allocating rules, the state where both parties are domiciled is likely to have the dominant interest. Determination of priority in cases without common domicile is more difficult. It may be presumed, however, that a state with a domiciliary connection has a stronger interest in application of a loss-allocating rule than a state with only a territorial connection. d. Reasonable expectations of the parties. It is possible in some cases that application of the law of the state with the dominant interest, as determined in Comment c, would be unfairly surprising to one or more of the parties. (The constitutional limits on choice of law imposed by the Due Process Clause are discussed in § ___.) In such case, a different law may be more appropriate.


§ 6.09. Party Choice (1) Parties may choose the law to govern a tort after its occurrence by mutual

agreement to the same extent as they could settle a tort claim under the law that would apply in the absence of a choice.

(2) Parties may choose the law to govern a tort before its occurrence by mutual agreement to the same extent as they could choose the law to govern a contractual issue that they could not have resolved by an explicit provision in their agreement directed to that issue. [however phrased in Contracts Chapter] Parties may choose a law that eliminates tort liability to the same extent that they could agree to waive that liability under the law that would apply in the absence of a choice.

[TBD in light of Contracts Chapter] Comment: a. Party autonomy and tort choice of law. Party autonomy has long been considered an important value in contractual choice of law, and this Restatement continues that tradition. See Chapter 8, §§ ___. The role of party choice with respect to torts has been less explored and was not explicitly addressed in the Restatement Second. There is nonetheless a relatively robust practice of honoring some party choices of law in tort cases under the Restatement Second and other modern approaches. This Section makes the scope of party autonomy explicit. Comment on Subsection (1): b. Post-dispute choice of law. After a tort has occurred, parties may settle the tort claim. In a settlement, the plaintiff agrees to release the claim in exchange for some specified compensation. That compensation may take the form of a particular amount of money. It may also take the form of certain legal rights. Conceptually, an agreement whereby plaintiff and defendant agree that a tort claim shall be decided under the law of a particular state is no different from a settlement agreement whereby the plaintiff agrees to release whatever tort rights he or she possesses in exchange for the defendant’s agreement to pay whatever would be due under the law selected. Thus, a post-event agreement that claims should be decided under a certain state’s law should be enforceable to the same extent as a settlement agreement. This Section does not address the conditions under which a settlement agreement is enforceable or will be approved by a court. Comment on Subsection (2): c. Pre-dispute choice of law. The Restatement Second did not explicitly discuss parties’ capacity to choose the law that would govern tort claims between them. American courts applying the Restatement Second and other modern approaches have nonetheless consistently assumed that the parties have such power and tend to focus their attention on interpreting choice-of-law clauses in order to determine whether that power has been exercised. This Section does not address that question of contract interpretation.

There appears to be no case rejecting the proposition that the power to choose law before the occurrence of a tort exists. To determine the limits on this power, this Section submits pre-dispute tort choice of law to the same test that governs choice of law for contract issues the parties could not have resolved by explicit agreement. See Chapter 8, § ___. An additional limitation is imposed in cases in which choice of a particular state’s law has the effect of eliminating tort


liability that would exist under the otherwise-applicable law. In such cases, the choice will not be enforceable unless the parties could have agreed to waive the tort liability. This Section does not address the conditions under which tort liability may be waived.

§ 6.10 Products Liability

(1) Liability for injury caused by a product is determined by the law of (a) the state where the product was delivered to the first end user, if that state is also the plaintiff’s central link, or the place of injury, or the place of manufacture, or the defendant’s central link and the product was available in that state through ordinary commercial channels; or if not (b) the plaintiff’s central link, if that state is also the place of injury, or the place of manufacture, or the defendant’s central link and the product was available in that state through ordinary commercial channels; or if not (c) the place of manufacture, if that state is also the place of injury or the defendant’s central link and the product was available in that state through ordinary commercial channels. (2) If Subsection (1) does not select the governing law, liability is determined in

accordance with the general tort rules. (3) Issues relating to damages are determined by the law selected under the rules for

such damages or the general tort rules. Comment: a. Scope of section. The rule of this Section applies to claims against manufacturers, sellers, or other parties in the chain of distribution, for injuries caused by products, on the basis of negligence or strict liability. b. Rationale. Products-liability claims typically feature five relevant contacts: the place of acquisition, the place of injury, the state to which the plaintiff is linked, the place of manufacture, and the state to which the defendant is linked. Thus, analysis requires a more complex rule than the rules of Topic 1, which consider only four (conduct, injury, and the parties’ central links). The rule of this Section sequentially examines three of the relevant contacts (place of acquisition, plaintiff’s central link, and place of manufacture) to determine whether one of them also supplies another of the relevant contacts. If so, it selects the law of that state. This rule reflects a judgment that selection of a state’s law is justified if the state possesses at least one of those three contacts and at least two of the five, and that if multiple choices are justified, the place of acquisition is most desirable, followed by the plaintiff’s central link, followed by the place of manufacture. The place of acquisition is deemed the most desirable because (subject to the qualifications noted in Comment c) it is the state with which both parties have voluntarily associated themselves and therefore provides the law most likely to have shaped shared expectations and to be reflected in pricing decisions. The plaintiff’s central link is next most desirable because that state has an interest in compensating the injured plaintiff but also has an interest in ensuring that products are available to its domiciliaries at reasonable cost. Comment on Subsection (1): c. First end user. The products that give rise to products-liability suits are obtained in various ways. They may be purchased from the manufacturer, or through an intermediary, or


second-hand through a more extended chain of distribution. In the first of these cases, the manufacturer knows the location of the sale and can adjust prices based on its legal exposure to liability; in the last, it does not and cannot. Since the place of acquisition is considered a desirable source of law because it is the state with which the parties have voluntarily associated themselves, it should be given priority as a source of law only when such is indeed the case. The phrase “first end user” is intended to identify the first sale to a person who will use the product. Illustrations: 1. Amy, a resident of state X, buys a product from Manufacturer to be shipped from Manufacturer’s plant in state Y to her state X residence. She later holds a yard sale there and sells the product to Beth. The product injures Beth in state Z. State X is the place of delivery to the first end user. 2. Same facts as Illustration 1, except that Amy delivers the product to Beth in state Z. Because Amy is the first end user, the place of delivery to the first end user is still state X. 3. Manufacturer sells a product to Intermediary in state X. Intermediary ships the product to state Y and there sells it to Jose. The product injures Jose in state Y. State Y is the state of delivery to the first end user.

d. Place of injury. In most cases, the place of injury is easy to identify. In some circumstances, however, it may be more difficult. A person may be exposed to a harmful substance in one state and suffer the effects later, in another, or a person may be exposed over a period of years in different states. If injury or its elements are spread over multiple states, each state may be counted as the place of injury for the purposes of this Subsection as long as the connection to each is substantial.

Illustration: 4. John uses a product in state X while domiciled there. He later moves to state Y, where an injury manifests. Both X and Y qualify as the place of injury for the purposes of this Subsection. If, however, John remained domiciled in state X but happened to be on a brief trip to Y when the injury manifested, Y would not qualify as the place of injury.

e. Plaintiff’s central link. Ordinarily, a plaintiff’s central link is determined for choice-of-law purposes by reference to the time at which the events giving rise to the claim occurred. If, as mentioned in Comment d, the events occur over multiple years, the plaintiff’s central link may change. If the plaintiff’s central link changes during the course of relevant events, each state that was linked at the time of a relevant event may be counted as the plaintiff’s central link for the purposes of this Subsection as long as the relevant event is substantial. Illustration: 5. Same facts as Illustration 4. Both state X and state Y qualify as John’s central link for the purposes of this Subsection. f. Available through ordinary commercial channels. If a product is not available in a state through ordinary commercial channels, it is unfairly surprising to use that state’s law for a products-liability claim. Comment on Subsection (2): g. Cases not decided by Subsection (1). If Subsection (1) does not select a law for determining liability in a particular case, the selection is returned to the general rules of Topic 1.


Typically, this will result in the application of § 6.05 or § 6.07(2), since cases in which manufacture and injury occur in the same state will be subject to § 6.10(1)(c), if not § 6.10(1)(a) or (b), while cases in which the plaintiff and the defendant share a central link will be subject to § 6.10(1)(b), if not § 6.10(1)(a). Comment on Subsection (3): h. Scope of Section limited to liability. The rule of this Section is applied to determine the law governing liability. Damages questions are subject to the general rules of Topic 1, with punitive damages also subject to the rule of § 6.__. A statute of repose relates to liability, and choice of law with respect to such statutes is performed under this Section.

§ 6.11 Punitive Damages The law governing the availability of punitive damages is the law selected under the rules of Topic 1 [§§ 6.01-6.09], or Topic 2 [§§ 6.10 et seq.] if the relevant tort is listed there. However, punitive damages may not be awarded unless they are available under the law of at least two of the following states: (1) the defendant’s linked state; (2) the place of conduct; (3) the place of injury.

Comment: The availability of punitive damages varies from state to state, and the willingness of states to award punitive damages in multistate cases is likewise varied. There are, however, discernible patterns. A Section specific to punitive damages is necessary, in addition to the analysis under the rules of Topic 1, because the significance of certain connecting factors differs from the ordinary tort case. Because punitive damages are designed to punish the tortfeasor, rather than compensate the victim, the tortfeasor’s domicile or other central link is a more significant contact, and the victim’s domicile or other link is less significant. This Section creates a limit on the availability of punitive damages that is consistent with majority practice: it works to make sure that the ordinary choice-of-law analysis does not lead to an award of punitive damages that is unsupported by adequate state interests.

§ 8.01. Law Applicable to Contract Disputes

Contract issues are resolved by the law chosen by the parties in accordance with the rule of § 8.02. In the absence of an effective choice of law by the parties, contract issues are determined according to the provisions of §§ 8.05-8.10.

Comment:

a. Scope of Section. The rule of this Section applies to all contracts and all issues that a court might conclude, consistent with § 5.04 and the provisions of this Chapter, should be characterized as contract issues.

b. Process of choosing law governing contract issues. In contract disputes, one must first determine whether or not the contract in dispute contains a choice-of-law clause. For contracts with a choice-of-law clause, the next inquiry is whether the particular issue in dispute is within the scope of the choice-of-law clause: a choice-of-law clause may not govern a particular issue because the clause is not drafted broadly enough to cover the particular issue. Matters related to interpreting the scope of choice-of-law clauses are governed by §§ 8.03-8.04. If a dispute is covered by the choice-of-law clause, then the next question is whether the choice-of-law clause should be


honored. The law does not honor a choice-of-law clause when it is beyond the parties’ power to create. When a contract contains no choice-of-law clause or the existing contractual choice-of-law clause is either unenforceable or insufficiently broad, §§ 8.05-8.10 provide the general governing principles as to which law governs the resolution of the particular choice-of-law issue. c. Characterization. The subject matter of contracts often touches other legal categories for which specific conflict-of-laws rules may be relevant. The process of determining the proper characterization of a legal issue that touches on contract law is generally governed by the characterization principles of § 5.04 of this Restatement. One common characterization issue pertains to contracts that involve property. Some property issues implicate special characterization rules, which can be sensitive to whether the issues concern real property and personal property.

§ 8.05. Contracts Without a Choice-of-Law Clause (1) In the absence of an effective choice-of-law clause, the governing law is chosen

according to applicable presumptions outlined in §§ 8.06-8.10. (2) If no controlling presumption applies to a particular legal issue, the contacts

governing the choice-of-law determination shall include one or more of the following: (a) Place of performance for the contract;

(b) Place of negotiating the contract;

(c) Central link of each party;

(d) Place of the subject matter of the contract; and

(e) Place of executing or otherwise making the contract.

These contacts shall be evaluated by reference to their relevance to the particular conflicting laws and the policies behind the conflicting laws. The state with the most directly relevant contact or contacts shall provide the governing law.

(3) The strength and relevance of the contacts and policies should be considered in light of the following goals:

(a) promoting freedom of contract and transaction planning; (b) giving effect to the parties’ justified expectations concerning which state’s

laws apply to the particular issue, and (c) protecting one party from another party’s unfair use of bargaining

power.

Comment on Subsection (1): a. Scope of Section. This Section applies in all situations in which the parties have not

created an effective choice of applicable law in their contract and in which no presumption from §§ 8.06-8.09 is applicable. Comment on Subsection (2):

b. Role of presumptions. The overriding goals of this Restatement and the contract provisions of this Chapter are to promote simplicity and predictability as well as to honor parties’


expectations and desires for smooth transaction planning. For that reason, the presumptions of §§ 8.05-8.09 dominate when those presumptions apply. Circumstances may exist when more than one presumption applies, but all presumptions point to the same state. In those instances, the law of the shared state should govern. Although unlikely, it may be possible that the applicable presumptions will designate different states to provide governing law. In the event of this contradiction among presumptions, this Section will govern the choice-of-law questions, rather than the law of one of the specific states designated by one of the applicable presumptions. Given the variety in contractual subject matter, parties, and circumstances, the presumptions cannot cover every situation that will arise. For this reason, a general Section such as this one is needed to cover cases that do not fit easily into predetermined rules.

Illustration: 1. Bobby and Monique are domiciled in State A. They entered into a contract,

providing that Bobby would provide personal services in State B. They negotiated and signed the contract in State B. The contract does not have a choice-of-law clause. An issue emerged as to whether the contract should be interpreted to require Monique to provide a particular service under the terms of the contract. State A and State B laws differ on this issue. Under the presumptions in this Chapter, § 8.09 designates State B law as the governing law because State B is where services under the contract will be performed. Sections 8.07 and 8.08 designate State B law as the governing law because the contract will be performed there and was also negotiated and created (formalized) there. The presumptions from each of these Sections all point to the same state: State B law will govern the contract issue. c. Overview of Subsection (2). For contracts without an effective choice-of-law clause, this

Subsection applies when this Chapter does not designate a presumptive jurisdiction to provide governing law or in the unlikely event that more than one applicable presumption points to different jurisdictions as providing governing law. This Subsection sets forth five contacts that may be useful in identifying the law that should govern a contract question. The contacts are roughly ordered on this list according to their likely significance, although the importance of a contact will always depend on the particular legal issue in play. As explained in Comment e of this Section, the place of performance for the contract is likely the most relevant contact for identifying the state to provide the governing law. Comment f explains that place of negotiation can also prove an important choice-of-law contact, especially when the circumstances of a parties’ negotiation in a particular state suggests their expectation that the law of that state will govern their contract. Comments g and h explain that the central links of the contracting parties and the subject matter of a contract tend to be less influential. These contacts do not carry importance for all contracts and have controlling influence only for specific contract types or specific contract-law issues. Finally, the place of making or executing a contract has reduced significance in choice-of-law determinations, but bears consideration when the parties’ actions suggest that they anticipated that the place of making a contract would provide the laws governing disputes arising from the contract.

This Subsection also embodies the well-established notion that contacts should be analyzed in light of the policies that conflicting laws are each attempting to further. When that analysis does not yield an obvious result, three overriding values reflected in contract law should guide the choice-of-law result: facilitating transaction planning, protecting parties from unfair use of superior bargaining power, and giving effect to justified expectations of the parties.

d. Considering contacts in light of policies. When contacts are considered, the contacts should not simply be applied mathematically by counting which state has the most contacts.


Deciding a choice-of-law question by counting contacts is similar to the “center of gravity” or “grouping of contacts” approach to choosing governing law sometimes endorsed by States. This Section specifically rejects those approaches, instead directing focus on those contacts that have specific significance to the policies behind laws. In evaluating the contacts in light of the relevant policies, the court may frame its analysis by asking which state’s law is most directly implicated by the contacts and legal issue in dispute.

When significant contacts involving a contract are located in two or more states with identical laws on the issue in question, the case will be treated for choice-of-law purposes as if these contacts come together in a single state.

Illustration: 2. Toni and Aaron have their central link (domicile) in State C. In State A, Toni and

Aaron negotiated and executed a contract that is performed in State B. States A and B have the same rule on the subject of consideration, but State C has a conflicting rule. In evaluating what law of consideration applies, the case should be treated for the purpose of this Chapter as if the contract was negotiated and executed in one State (which has the rule of States A and B), but the parties’ central link is in State C.

Sometimes a case will come close to triggering one of the presumptions of §§ 8.07-8.10, but fall short of satisfying the criteria. In that event, the court should seriously consider applying the law that the presumption will designate. To do so generally would further the goals of promoting law’s predictability and simplicity.

e. Place of performance for the contract. Place of performance will often have controlling significance in choosing which law governs contract disputes. Performing a contract and fulfilling its promises are usually the goals of an agreement. For that reason, the place where performance occurs (or is planned to occur) will prove important to parties as they develop expectations about what law will govern their disputes, even for issues that do not relate strictly to performance. Accordingly, giving dominance to the place-of-performance factor is consistent with honoring party expectations and promoting transaction planning. Moreover, the state where a contract is to be performed will likely have an interest—and often even a dominant regulatory stake—in the legality, interpretation, and enforcement of the contract. Giving strong weight to place of performance in choice-of-law deliberations is consistent with efficient decisionmaking and predictability as well, since the place where a major portion of contract services has occurred or is to be performed will usually be readily ascertainable.

The significance of place of performance enhances when the contract explicitly specifies where the parties will perform the contract as well as when both parties are to perform their duties under contract in the same state. If a contract is performed in several locations, the place where the plurality of performance takes place under the contract acts as the place of performance for the choice-of-law determination. If, however, no such place exists because a contract is performed in many different states, then the place of performance will not act as a significant factor.

Illustration: 3. Technology Company has its central link in State A, including its principal place of business. Consumer Company has its central link in State B, including its principal place of business. The two companies negotiated a contract for Technology Company to train some of Consumer Company’s employees in certain technological skills. The contract was negotiated over the phone, with representatives of each company in different states. The


contract was signed in State A when a representative of Consumer Company came to State A to tour facilities there. Under the contract, Technology Company would offer a one-time, eight-hour course to Consumer Company’s employees at Technology Company’s State A education facility. The contract further provided that for the remaining two years of the contract, Technology Company employees would travel to Consumer Company’s facilities in State B to provide a series of 10 additional two-hour training sessions. The principal place of performance under this contract is State B.

A dispute emerges as to when these additional training sessions must occur. State B’s law should provide the governing law for this question because (1) as is true in most cases, place of performance appears key to the contracting parties’ decisions about contractual details; (2) the disputed question relates to performance; (3) other connecting factors do not provide clear guidance given that these additional factors are spread among the two States; and (4) no facts suggest that the execution of the contract in State A had significance to the parties.

f. Place of negotiating the contract. The place of negotiation can play a significant role in deciding which law governs a contract issue, at least when (1) the parties’ actions in negotiating in a particular place suggests an expectation that the law of that place will govern their contract, (2) when the state laws in conflict seek to regulate the process of negotiation, or (3) when the place of negotiation has other pertinent connections with the parties or the transaction.

Courts have often held that, standing alone, place of negotiation does not tend to weigh heavily in conflict-of-laws determinations. Factors mitigating the importance of the place of negotiation include such matters as (1) a location for performing the contract in a different state that is explicitly stated in the contract, (2) a negotiation process that occurred in many places, or (3) a negotiation process that occurred by some combination of hard-copy mail, telephone, and electronic means (when the negotiating parties were not present in the same state). In addition, the place of negotiation does not play much, if any, role in choosing governing law under circumstances when a court decides that the agreement was offered as a “take-it-or-leave-it” adhesion contract, without meaningful negotiations.

g. Central link of each party. The central link of each party is determined by the principles of Chapter 2 of this Restatement. The concept of a central link is an umbrella term encompassing both natural and juridical persons. For natural persons, this is the person’s domicile as defined by § 2.02. For juridical persons, which would include corporations and limited partnerships, § 2.08 provides the definition of a central link. According to § 2.08(2), the central link for a juridical person is presumed to be the juridical person’s principal place of business.

For choice-of-law purposes in the contracts setting, the significance of the parties’ central links depends largely on the legal issue in conflict and on whether the central links are grouped with other contacts. For example, capacity to contract presents a legal issue for which a party’s central link can be particularly important. Likewise, when the law of a party’s central link takes a strict approach to regulating those who enjoy superior bargaining power, the central-link contact takes on even more significance when the contract was negotiated in the central-link state. The same is also often true in the case of life-insurance-contract laws, which are frequently tied to the central link of the insured person. Special rules regarding life insurance contracts appear in § 8.10.


Illustration: 4. In State C, Lilly and Raphael negotiate and execute a contract. The contract is to

be performed in State Z. State D is the place of Lilly’s central link (domicile). Under State D law, Lilly has capacity to enter into the contract. Raphael also has a central link (domicile) in State D. Although State Z law also recognizes that Lilly has capacity to contract, Lilly lacks capacity under the law of State C. Because the state of her domicile has provided that persons like Lilly do not need the protections that an incapacity rule provides, State C’s law to the contrary should apply only if there were reason to believe that State C has particularly strong interests in Lilly and in the contract that would overshadow State D’s law on the question of the contractual capacity of one its domiciliaries. The state of domicile generally will have the strongest interest in controlling the question of capacity. Accordingly, in most cases such as this, insufficient reason would exist to disregard the law of Lilly’s domicile in order to invalidate the contract. Although not necessary to this conclusion, the law granting capacity in the state of performance reinforces the decision to honor the contract.

h. Place of subject matter of the contract. The place of the contract’s subject matter will frequently overlap with the location of other contacts relevant to the choice-of-law determination, and accordingly will often reinforce the significance of the place where the other contacts are situated. Standing alone, however, the place of the contract’s subject matter will not generally have a controlling effect on the choice-of-law determination. Contracts to transfer interests in real property present one exception. The situs of the real property has historically had a strong impact on choice-of-law decisions regarding such contracts and will continue to some degree under this Restatement. As with other contacts listed in this Section, however, the effect of this preference for the situs of real property is also subject to the presumptions described in §§ 8.07-8.10. Accordingly, although the location of the real property will usually govern a contract to transfer interests in real property, that result would yield to another jurisdiction designated according to the presumptions described in §§ 8.07-8.10.

i. Place of executing or otherwise making the contract. The place of making a contract is the place where—according to forum law—the last act occurs that is necessary to give the contract binding effect. Usually this act will be the execution of the contract. The place of making a contract is often called the place of contracting. The place of contracting does not tend to provide a significant contact in choice-of-law decisions, however, since that place is often a fortuitous byproduct of convenience, arising from a combination of the parties’ central links, the place of the parties’ negotiations, or other plans and activities that are unrelated to the contract itself. Additionally, the place of contracting is rendered even less significant by evolving trends in contracting by electronic means, difficulties in ascertaining the place of making for unilateral contracts, and variations in identifying the place of making depending on the contract type. Nevertheless, when grouped in the same jurisdiction as other contacts, such as place of performance, place of contracting takes on enhanced significance. As a consequence, § 8.08 provides that when the place of making a contract and the place of performance of a contract occur in the same state, the internal law of this state is presumed to govern. Comment on Subsection (3): j. Using contract-law goals in choice-of-law decisions. Even for cases where presumptions from §§ 8.07-8.10 are not implicated, evaluation of the contacts relevant to choice of law will often a yield an obvious result. This result might emerge as a consequence of the overwhelming number of relevant contacts in one state or a particularly strong analytical link between one contact and


the policy motivating one of the conflicting laws. In both these cases, the appropriate governing law is clear. In those instances when the result is not clear, several goals of contract law are particularly well suited to assist in evaluating the strength and relationship between contacts and policies: promoting freedom of contract and transaction planning, giving effect to the parties’ justified expectations concerning which state’s laws apply to the particular issue, and protecting one party from another party’s unfair use of superior bargaining power. A court may use these goals as a tool for evaluating the strength of a relevant contact as it relates to a law’s policy or for choosing among conflicting evidence about which of several conflicting contacts should have controlling influence on the choice-of-law determination.

Illustration: 5. Beatrice, a business owner in State A travelled to State B, where she engaged a

lawyer—Sofia—to assist Beatrice in litigation regarding her company, Multistate Corp., which did business in State A and State B. A well-educated entrepreneur, Beatrice has several businesses in addition to Multistate Corp. Beatrice’s central link (domicile) is in State A. Sofia’s central link (domicile) is in State B and she is licensed to practice law there. While in Sofia’s office in State B, Sofia and Beatrice signed an agreement under which Sofia would represent Beatrice’s interest in disputes related to Multistate Corp. They also signed a separate agreement stating that Sofia would receive a 25 percent share of any recovery from litigation filed on behalf of Beatrice. This agreement specified that Beatrice would be obligated to remit this sum once she received and deposited recovery in any lawsuit and that any lawsuits would be filed in State B. Neither the representation agreement nor the contingency-fee agreement contained a choice-of-law clause.

Sofia filed suit on behalf of Beatrice in State B and secured a substantial settlement. Beatrice received the settlement check and deposited it in a State A bank. From her State B office, Sofia emailed Beatrice in State B to demand the contingency fee. By email sent from State A, Beatrice refused. The contingency-fee agreement was enforceable under State B law, but not under State A law. State A’s law is designed to protect clients from overreaching lawyers, and State B’s law is designed to ensure that lawyers are able to conduct successful legal-service businesses in the State.

The contacts in this set of facts are spread relatively evenly between two states. The performance of the contingency-fee agreement was to take place in both State A and B: the lawsuit was prepared and filed in State B, but Beatrice was to remit the contingency fee in State A. The agreement was negotiated and made in State B. The parties have different central links (domiciles)—one in State A and one in State B. Consequently, no presumption regarding governing law clearly applies.

Consideration of the laws’ policies in light of the contacts in the state does not resolve the conflict: State A is trying to protect clients. Beatrice is a client who has her central link (domicile) in State A. She therefore falls within the ambit of persons that the law is trying to protect. State B is trying to protect professionals like Sofia who lives and does business in State B. The policy behind State B’s law is therefore implicated as well.

Given that the presumptions and contacts do not offer a clear answer to the conflict-of-laws question, a court should refer to the policies mentioned in this Section. These policies point to application of the law of State B. Promoting freedom of contract and transaction planning favor giving effect to the separate agreement reached between Sofia and Beatrice. State B’s law would do that. The parties’ actions and agreement suggested


that they expected that State B’s law would govern their affairs. They negotiated and signed the separate agreement in State B, stipulated that any lawsuit would be filed in State B, and understood that Sofia is a professional licensed under the laws of State B. Beatrice’s decision to travel to State B for negotiating and finalizing the contract also weigh in the analysis.

Concern with protecting one party from another party’s unfair use of bargaining power is diminished here because Beatrice is a sophisticated business woman who left State A in order to enter into a contract in another State under circumstances where it was clear that the contract would be at least partially performed in the other State. This observation helps to minimize the relevance and strength of State A’s interest in protecting its domiciliary in a situation like this.

k. Promoting freedom of contract and transaction planning. Freedom of contract has traditionally served as a dominant animating principle behind contract law. Although the normative rationales underpinning the concept have varied and evolved over the years, freedom of contract has consistently informed resolution of both contract and choice-of-law disputes. Courts have recognized that the overriding principle of freedom of contract is promoted only when the law seeks to accommodate private choices that parties memorialize in their agreement. Transaction planning is intimately tied to freedom of contract, since parties can effectively plan and execute a transaction only when the law allows them choice in structuring the terms of their agreement. When parties can rely on courts to approach their agreements with an orientation of respect for the terms that the parties’ memorialized, the parties are able to better predict the consequence of their agreements and plan their affairs in reliance on their expectations. In evaluating the weight to give the goals of promoting freedom of contract and transaction planning, courts should consider the extent to which all the parties freely undertook the contractual obligations. Courts are less inclined to emphasize freedom of contract as a goal when parties do not share equal power to negotiate the terms of their agreement. l. Identifying and protecting justified expectations concerning which law applies. Freedom-of-contract principles honor parties’ expectations about the nature and effect of their agreement. The goal of protecting expectations about governing law is part of this concern. In a contractual arrangement, parties may develop an understanding of what law will likely govern their deal if it should go awry. A court can identify the parties’ expectations about governing law by such evidence as the parties’ activities, their statements, and the contract terms. A freely negotiated choice-of-law clause that encompasses the disputed issue is clear evidence of party expectations. Nonetheless, a choice-of-law provision lacking the scope to cover a particular legal issue can also suggest what law the parties anticipated would govern the portion of their affairs that is not formally covered by the choice-of-law clause. Likewise, a choice-of-forum clause or a specific provision stipulating the place of performance is other evidence of the parties’ expectation.

Expectations that a particular state’s law should govern can be justified if (i) the jurisdiction has a reasonable relationship with the parties and the transaction or (ii) the parties have conducted their affairs in such a way as to anchor their contractual relationship in a particular jurisdiction. The standard, however, not only requires that the expectations be justified, but also that the expectations should play a prominent role in the choice-of-law decision. m. Protecting one party from another party’s unfair use of bargaining power. Case law and legislative enactments addressing unequal bargaining power between contracting parties are varied, nuanced, and sometimes reflect conflicting views on the appropriate role for law in regulating the matter. On one hand is the view that law should intervene aggressively to ensure


against the inequity and unfairness that might result when one party dominates and controls the contracting process. Some advocates of this view also argue that one-sided, take-it-or-leave-it contracts do not tend to allocate resources efficiently. Another view, however, holds that form contracts, which are drafted and controlled by a stronger contracting party, are not only an unavoidable part of a large robust economy, but often work to promote efficiency, stability, and simplicity. This view notes that as private persons navigate day-to-day life, they generally lack some combination of time, expertise, and inclination to negotiate the terms of an agreement that is not core to their lives. Choice-of-law determinations should be mindful of this tension. In considering asymmetrical bargaining power, courts making choice-of-law decisions should take note of the different approaches among states toward the procedural and substantive results of the asymmetry. Some laws focus on procedural problems with contract negotiations and seek to regulate oppressive negotiations and surprise. Other laws focus on substantive problems, which seek to regulate overly harsh or one-sided results from unequal bargaining. This distinction can be important as courts evaluate relevant contacts and policies behind laws. General consensus exists, however, that certain categories of contracts implicate the need to protect against overbearing parties. These categories include insurance contracts, employment contracts, franchise contracts, and contracts that enable one party to engage in activities that are in tension with lawful practices. For contracts of these kinds, courts routinely use law to counterbalance the effects of unequal bargaining power when navigating complex conflict-of-laws questions. In so doing, courts must ensure, however, that a particular contract in dispute actually did result from unequal bargaining. The process of negotiation (or lack of negotiation)—not the subject matter of the contract—controls whether the contract results from procedural inequities in bargaining, which produced an unfair result.

§ 8.06. The Role of Presumptions The presumptions in §§ 8.07-8.10 govern choice-of-law decisions for contracts without an effective choice-of-law clause when those presumptions apply unless another result would be manifestly more appropriate.

Comment: a. Rebuttable presumptions. The presumptions set forth in this Chapter apply only for contracts without an effective choice-of-law clause. The presumptions may be rebutted upon a showing that applying a different state’s law to a choice-of-law issue is manifestly more appropriate than the result the presumption yields. The circumstances under which a different state’s law may provide a manifestly more appropriate result are described in § 5.03 of this Restatement, with accompanying Comments and Reporters’ Notes. b. When presumptions do not apply. The presumptions in §§ 8.07-8.10 have detailed specifications. When the specifications for each presumption are not fulfilled, the presumption does not apply. In that event, § 8.05 governs the choice-of-law problem. Even in that event, a court should give strong weight to guidance the presumptions provide when evaluating what law to apply. In the event that more than one presumption may apply to a given choice-of-law issue, § 8.05, Comment b, makes clear that the law designated by the presumptions should govern when the presumptions point to the same state. In the unlikely event that the presumptions designate different states to provide governing law, § 8.05 governs the choice-of-law issue. See § 8.05, Comment b.

§ 8.07. Negotiation and Performance in the Same State If the place of negotiating the contract and a major place of performance are in the same state, the internal law of this state will apply to resolve choice-of-law issues relating to the contract.

Comment: a. Rebuttable presumption. The presumption set forth in this Section provides that when the place of negotiating a contract and a major place of performance for the contract are the same, the internal law of this state provides the governing law to resolve a choice-of-law issue. This presumption does not apply if the contract contains an effective choice-of-law clause. This presumption may also be rebutted upon a showing that applying a different state’s law to a choice-of-law issue is manifestly more appropriate than the result the presumption would yield. The circumstances under which a different state’s law may be manifestly more appropriate are described in § 5.03 of this Restatement, with accompanying Comments and Reporters’ Notes.

Illustration: 1. Rob suffered from mental disabilities and was deemed incompetent to make a valid contract under the laws of the state where he has a central link, State A. The State A laws made clear that Rob’s lack of capacity to contract should have extraterritorial effect outside State A. Rob travelled to State B where he negotiated a contract that was to be performed in State B. This contract obligated him to pay a large amount of money in State B. Rob’s mental disability was obvious to the other party to the contract. The contract was valid in State B, but was invalid in State A. Although Rob negotiated the contract and was obligated to perform the contract in State B, the presumption does not apply. Given the importance of State A’s interest in protecting its disabled domiciliary and the strength of State A’s connection with Rob, State A governs Rob’s capacity to contract.

b. Reason for presumption. The presumption in this Section serves both purposes of transaction planning and honoring party expectations. Standing alone, a decision to negotiate a contract in a particular place does not necessarily have controlling significance. Yet the decision to negotiate the contract in a particular place is usually volitional and, when combined with plans to perform the contract in the same place, suggests an expectation both that the law of that place will govern the contract and that it is appropriate for the law of that place to govern the contract. If parties want to avoid this result, they have the option of planning and negotiating the transaction differently. Moreover, contract laws are often concerned with ensuring that the process of negotiating and creating a contract produces a fair obligation that serves the parties’ individual needs and a rational allocation of resources. When contracts are negotiated and to be performed in one place, that place presumptively has a dominant stake in regulating the validity and terms of enforcing a contract. c. Negotiation or performance in more than one place. In the contemporary world, contracts are often negotiated or performed in more than one place. When that is the case, the location where the plurality of the negotiation occurs shall act as the place of negotiation. Likewise, the place in which the plurality of performance occurs shall act as the place of performance. When a place with the plurality of events amounting to negotiation or performance cannot be determined, the presumption in this Section is not applicable. d. Adhesion contracts. In circumstances when a court decides that an agreement amounts to a “take-it-or-leave-it” adhesion contract, this Section’s presumption may not be applicable, since the process of actually negotiating the contract may not have occurred. The court may nonetheless


choose to apply the presumption when evidence of an attempt to negotiate in a particular place occurred and was met with some cooperation.

§ 8.08. Making and Performance in the Same State If the place of making the contract and a major place of performance for a contract are in the same state, the internal law of this state is presumed to apply to resolve choice-of-law issues relating to the contract.

Comment: a. Rebuttable presumption. The presumption set forth in this Section provides that when the place of making a contract and the place of performance for a contract are the same, the internal law of this state provides the governing law to resolve a choice-of-law issue. This presumption does not apply if the contract contains an effective choice-of-law clause. This presumption may also be rebutted upon a showing that a different state’s law is manifestly more appropriate than the result that would follow from the application of the presumption. The circumstances under which a different state’s law may be manifestly more appropriate are described in § 5.03 of this Restatement, with accompanying Comments and Reporters’ Notes. For further illustration, see § 8.07, Illustration 1. b. Reason for presumption. The presumption in this Section serves both transaction planning and honoring party expectations. Standing alone, the decision where to make a contract may not have controlling significance. Nonetheless, the decision to make a contract in a particular place is usually volitional and, when combined with plans to perform the contract in the same place, suggests an expectation that the law of that place may govern the contract. When the decision to make a contract in a particular place combines with plans to perform a contract in a particular place, the inference arises that the parties expected that the law of that place may govern the contract and that they believe it is appropriate that the law of that place governs their relationship. If parties want to avoid this result, they have the option of planning the transaction differently. c. Place of making a contract. The place of making a contract is generally where the last act occurred that was necessary to form the contract under the forum’s rules for offer and acceptance. This is often the place where the parties executed the contract. In instances when the parties were in different places at the time they finally formed an agreement, the contract is made when the last party finalized agreement with their deal. When the place of execution is not clear, the presumption from this Section will not govern. Ambiguity in this situation suggests that the place of making is the result of convenience or other facts, and not concerted party action and expectations. In that event, other rules may apply. d. Presumption may not be applicable when place of performance is in more than one place. In the contemporary world, contracts are often performed in more than one place. When that is the case, the location where the plurality of performance occurs shall act as the place of performance. When there is no place where the plurality of events constituting performance took place, the presumption in this Section is not applicable.

§ 8.09. Service Contracts Conflict-of-laws issues relating to contracts for the rendition of services are governed by the internal law of the place where a major part of the services are to be performed.


Comment: a. Rebuttable presumption. The presumption set forth in this Section provides that when a contract focuses on the provision of services, the internal law of the place where a major part of the services are to be performed governs conflict-of laws issues related to service contracts. This presumption governs such matters as the contract’s validity and rights created under the contract. This presumption does not apply if the contract contains an effective choice-of-law clause. This presumption may also be rebutted upon a showing that a different state’s law is manifestly more appropriate for governing in the particular circumstance. The various circumstances under which a different state’s law may be manifestly more appropriate are described in § 5.03 of this Restatement, with accompanying Comments and Reporters’ Notes. For further illustration, see § 8.07, Illustration 1. In those instances when the presumption does not apply because of limitations on its scope, choice-of-law issues pertaining to service contracts are determined under § 8.05. b. Scope of Section. This Section applies to contracts for the rendition of services whether a contracting party directly renders the services or an agent renders the services on behalf of the contracting party. The Section applies to contracts that are sometimes referred to as “personal services” contracts: contracts where a contracting party is retained because that party possesses skills, talents, or other qualities not easily performed by someone else. These include employment contracts, contracts with independent contractors, and contracts with professionals such as lawyers, doctors, and brokers. The Section is fashioned after § 196 of the Restatement Second, Conflict of Laws, which provided a place-of-performance presumption for service contracts. Although § 196 and its Comments did not explicitly include employees within its scope, courts routinely have applied it to employment contracts. c. Performance in more than one state. In the contemporary world, contracts are often performed in more than one place. When that is the case, the location where the plurality of performance occurs shall act as the place of performance. When a place with the plurality of events amounting to performance cannot be determined, the presumption in this Section is not applicable.

Illustrations: 1. An attorney was hired to provide independent contract work for a company that

had its principal place of business in State X. The attorney worked at this location for approximately eight weeks a year. The primary reason for the attorney’s hire, however, was to allow her to provide legal services at a satellite office in another country, Country Z, where she worked on the satellite office’s business for approximately 40 weeks per year. The “place of performance” for the contract is in Country Z.

2. Employee truck drivers were hired to drive rigs for Trucking Corp. Most of the drivers’ work concentrates in five States of the United States, and their work in these States is spread evenly among them. The presumption from this Section does not apply because no State is the place where the plurality of their work takes place.

§ 8.10. Insurance Contracts (1) Conflict-of-laws issues relating to life-insurance contracts are determined by: (a) the central link of the natural person insured under an individual policy at the time the person applied for the policy; or

(b) the central link of the entity that obtained a group life-insurance policy at the time the entity applied for the policy.


(2) Conflict-of-laws issues relating to contracts for fire, surety, or casualty insurance are determined by the state that the parties understood would be the principal location of the insured risk during the term of the policy at the time of application.

Comment: a. Rebuttable presumptions. The provisions in this Section provide presumptive rules for identifying the law that governs life-insurance contracts and contracts for fire, surety, or casualty insurance. These presumptions may be rebutted, however, upon a showing that a different state’s law is manifestly more appropriate than the result yielded by the presumption. The circumstances under which a different state’s law may be manifestly more appropriate are described in § 5.03 of this Restatement, with accompanying Comments and Reporters’ Notes. In those instances when the presumptions do not apply because of limitations on their scope, choice-of-law issues pertaining to life-insurance contracts or contracts for fire, surety, or casualty insurance are determined under § 8.05. b. Choice-of-law clauses. Special rules govern the question whether to enforce choice-of-law clauses in life-insurance contracts and contracts for fire, surety, or casualty insurance. These rules are reviewed in the Comments to § 8.02. When courts choose not to apply a choice-of-law clause in life-insurance contracts and contracts for fire, surety, or casualty insurance, the presumptions of this Section apply according to the specifications in this Section and its Comments. Comment on Subsection (1): c. Overview and scope of Subsection (1). This Subsection applies to both life-insurance contracts that have been issued to the insured upon individual application (individual policies) as well as group life-insurance policies obtained by an entity such as an employer (group policies). The location of the central link of an individual applicant or an entity that obtains a group life-insurance policy is identified by reference to the principles outlined in Chapter 2 of this Restatement. The presumption relating to individual insureds derives from the dominant interest of the state of the insured’s central link, an interest tied to the law’s well-established concern with ensuring fairness of life-insurance contracts for individual insureds. The presumption relating to group life-insurance policies arises from understanding that the entity that applies for and negotiates a master policy has more control of the process of negotiating and obtaining life insurance than the individual insureds. As it operates, the presumption for group policies will not frequently create a different choice-of-law result than the presumption for individual insureds because the entity that obtains a master life-insurance contract for a group of individuals will often possess the same central link for this purpose as the individuals covered under the master contract. For individual life-insurance policies, the presumption applies only for policies issued to an insured on personal application by the insured. The rule does not apply when an individual life-insurance policy is issued to someone other than the applicant. This presumption will cover a broad array of questions, such as whether a false statement made by the insured to the insurance company bars recovery upon the policy, the circumstances under which the insured can change the beneficiary and face amount of the policy, and the consequences of delay in payment of premiums. For other questions related to the law governing details of performance, a manifestly more appropriate law than the presumption yields may present itself, particularly when the central link of the individual insured changes from the time of application to the time of the dispute.


Illustration: 1. Amelia obtained an individual life-insurance policy and named her spouse,

Mallesh, as the beneficiary. At the time of application, Amelia and Mallesh had State A as their central link and represented this fact on the application. Five years later, the couple moved to State B. Two years after that, they divorced, but both retained State B as their central link. Amelia remarried, but neglected to change the beneficiary on her life-insurance policy. Ten years after that—a total of 12 years after moving her central link to State B and 10 years after her remarriage, Amelia died. In determining which law governs the issue of whether Amelia’s original beneficiary designation is still valid, a court may reasonably determine that it is manifestly more appropriate that the law of State B—the place of her 12-year central link and most recent marriage—governs this question rather than the law of State A.

For group life-insurance policies obtained by an entity such as an employer, the state where the entity obtaining the master policy has its central link at the time of the application will provide the presumptive law to govern. This approach ensures that all the individuals covered by the group policy enjoy the same rights and protections. d. Significance of time of application. This Subsection pinpoints the time of applying for the contract as the point of reference for determining the appropriate party’s central link because that location will be the one that the insurer relies on in evaluating the risk under the contract. The applicant can control which location the insurer considers when representing facts about the applicant’s central link for the purpose of the insurance application. If the applicant’s central link changes between application and delivery of the insurance contract, the applicant controls whether the insurer receives this information and the time of delivery can control so long as the applicant has informed the insurer of the change. Comment on Subsection (2): e. Overview and scope of Subsection (2). This Subsection applies to casualty insurance of many kinds, including theft insurance, collision insurance, and liability insurance. The Subsection also applies to contracts for fire insurance and surety insurance. The presumption in this Section applies only when the parties had a mutual understanding of the risk’s location. In many instances, the object of the insurance is in a fixed location. In that event, the presumption in this Subsection controls. Since the location of a risk is tied to the quality and scope of the risk, location is a key factor for the parties in evaluating the potential threats to the risk and consequent cost of insuring it. Moreover, the location where the risk is found is a logical place for the parties to expect governing law to originate, and the location state has an interest in issues pertaining to the insurance contract. If the risk’s location unexpectedly changes after the parties finalize the contract, the new location may control if it would be manifestly inappropriate to use the state of the original location as the source of governing law. The law designated by the presumption applies to questions such as whether a false statement by an insured to a company bars recovery under the policy, whether an insured’s failure to promptly report an accident releases the insurer from liability, or whether the insured can recover the cost of defense from an insurer. This Section may be qualified by state statutory insurance regulation, which can significantly impact conflict-of-laws principles in this area, particularly for matters such as environmental contamination and other property damage. If such statutes are valid under state law and U.S. constitutional principles, this Section’s presumption as well as other state conflict-of-laws principles will yield to them.


f. Principal location of insured risk. An insured risk is the object or activity that is the subject matter of fire, surety, or casualty insurance. The presumption in favor of applying the law of the insured risk’s location applies when the risk will be in a state for the major portion of the insurance period. The presumption enjoys greatest strength when the risk is immovable and for that reason its location is static and easily determined. By contrast, the presumption is not directly applicable when the insured risk moves among many different states. In the case of chattels, the significance of the state of the chattel’s original location diminishes as the length of time expands that the chattel will be in another state. Finally, in instances when the policy covers several risks located in many states, the presumption is “site-specific”—meaning that the law of the state where each risk is located governs conflict-of-laws questions relating to that risk.

Illustration: 2. Allison owned two houses, one in State A and one in State B. She has one fire and casualty policy covering the houses. She stopped paying premiums on the insurance for a time and during that period the house in State B suffered extensive fire damage. The laws of State A and State B differ on whether she should be considered in default under the policy. Because the damaged property is in State B, the law of that State will govern this issue.


Application of Draft Third Restatement Rules to Tort Cases in the Casebook

Under the draft Third Restatement, the choice of law rules governing torts will depend on whether the issues in conflict relate to conduct regulation or loss allocation. R3 §§ 6.02 and 6.03 each contain a long list of issues assigned to one category or the other

Tooker, Lopez and Schultz (pp. 64-86)

The major issues in cases are characterized by R3 as loss allocation (host guest and charitable immunity). As a result, they are covered by R3 § 6.06, which provides that when the relevant parties share a central link to a single state, that state’s law governs an issue of loss allocation.

It should not be lost on the students that applying the rule of common domicile for loss-allocation covers both the Babcock fact pattern, where both parties are from a recovery state and the accident takes place in a no-recovery state (a false conflict in the interest analysis sense) and the reverse-Babcock situation, where both parties are from a no-recovery state and the accident takes place in the recovery state. (potentially a true conflict in the interest analysis sense).

If charitable immunity were characterized as conduct regulating, as was suggested by the dissent in Schultz, the case would instead be covered by R3 § 6.05, which adds an extra layer of complexity. That section generally provides that when conduct in one state causes injury in another, the law of the state of conduct will govern an issue of conduct regulation, but adds a twist – if the location of the injury was foreseeable, the injured person may select the law of the state of injury. Thus, the injured person, but not the person whose action caused the injury, has a voice in the determination of which law governs. Under R3 § 6.05, since the conduct in Schultz took place in New Jersey (the negligent hiring of the sex abuser) New Jersey law would apply but the plaintiff would have the option of choosing the law of the place of injury inasmuch as it was foreseeable that any injury would take place in New York.

If you choose to take up the potential liability to Susan Silk, the Michigan resident who was injured in Tooker, the relevant rule would appear to be R3 § 6.07(1) under which the law of the state of conduct and injury – Michigan – would apply because, when the relevant parties have central links to different states and conduct and injury occur in a single state, that state’s law governs an issue of loss allocation.

Sinnott v. Thompson (p. 91)

This is a difficult case to figure out under R3. In this case plaintiff Thompson (a New York domiciliary) was a passenger in car driven by Sinnott (a Delaware domiciliary). Sinnott was drunk and Thompson knew he was drunk. Both Sinnott and Thompson were students in a North Carolina college and were going to a North Carolina restaurant when the accident took place. At


that time, North Carolina retained contributory negligence as a complete bar to tort suits, while Delaware had a comparative fault system.

This is a loss allocation case (contributory negligence and comparative fault are loss-allocating) with no shared central link, so R3 § 607 would apply. Under that rule, since the conduct and injury took place in North Carolina and the parties have central links to different states, North Carolina law would apply. However, comment c retreats from the rule of R3 § 607 a bit, stating that:

if each party is favored by his or her home law, the state of conduct and injury likely has a lesser interest in the application of its rules of loss-allocation than either of parties’ linked states. In such circumstances, application of one linked state’s law may be manifestly more appropriate, based on additional contacts with that state.

The comment refers to R3 § 5.03, which provides that the law selected by the choice of law chapters of R3 “will not be applied if a case presents exceptional circumstances that make the application of a different state’s law manifestly more appropriate. In such cases, the court will apply the manifestly more appropriate law.”

Spinozzi v. ITT Sheraton (p. 95)

This case would be governed by R3 § 607(1) because the relevant parties have central links to different states, and the conduct and injury occurred in a single state. This is the same result as in Restatement, Second, § 146.

Bernhard v. Harrah’s Club (p. 101)

Interestingly, R3 §§ 6.02 and 6.03 provide no guidance as to whether rules governing dram shop liability are conduct regulating or loss allocating. However, the Reporters’ notes to R3 § 605 lists Bernhard as a conduct regulating case.

This is a case in which conduct in one state caused injury in another. Seen as a conduct regulation case under R3 § 6.05, the law of the state of conduct (Nevada) would govern, except that, because the location of the injury was likely foreseeable (Harrah’s advertised heavily in California and apparently drew the bulk of its customers from California), the injured person would have the option of selecting the law of the state of injury (California), which he would certainly do in this case.

Seen as a loss allocation case under R3 § 6.07, California law would govern Bernhard, too. This is because the parties had central links to different states and the conduct and injury occurred in different states. As a result, the law of the state of conduct would presumptively govern the issue of loss allocation unless, as here, the injured person is linked to the state of injury.


Bourgeois v. Vanderbilt (p. 109)

If the dram shop law is characterized as conduct regulating it would be governed by R3 § 6.05. Under that section, initially the law of the state of conduct (Louisiana) applies. But Louisiana would deny liability here and R3 § 6.05 would allow the plaintiff to select the state of injury if it was foreseeable. The cities involved were very close to each other and it seems foreseeable that an intoxicated customer served liquor in Louisiana could injure someone in Arkansas. Thus, Arkansas law, under which plaintiff would recover, would be chosen by the plaintiff. This result would be contrary to the holding of the court that says it does not want to interfere with Louisiana permissive policy.

If, on the other hand, the dram shop law is characterized as loss-allocating, it would be governed by R3 § 6.06, which provides that if the relevant parties share a central link to a single state the law of that state governs. Since both plaintiff and defendant are Louisiana domiciliaries, the law of Louisiana would govern.

Medical Malpractice

Elder v. Perry County Hospital (p. 114)

The issue in conflict was a cap on damages for medical malpractice. The malpractice took place in Indiana (a state with a cap) but plaintiff, a six year-old boy, lived in Kentucky (a state with no cap), three miles away from the hospital. It appears that the doctor mistreated the plaintiff and a bacterial infection got worse. The plaintiff was moved to another hospital in Indiana but the infection had progressed to the point that it could not treated. The plaintiff died.

The forum in this case was Kentucky, which followed the Currie approach that if the forum has an interest in a true conflict case it should apply its own law. The R3 approach would bring about a contrary result.

It is clear that both the conduct and the injury took place in Indiana. Limitations on damages are characterized by R3 as loss-allocating (see R3 § 6.03(d)); thus the conflict would be addressed by R3 § 6.07(1) (see above) which provides that when conduct and injury take place in the same state, that state’s law governs.

The R3 rule makes sense for most medical malpractice cases inasmuch as a provider acting in his/her home state should generally not be subjected to the law of a visiting plaintiff, we can imagine a court applying the law of Kentucky in this case; after all, the hospital involved in this case was a regional hospital that sought and served patients from both Indiana and Kentucky. Indeed, there was sufficient contact with Kentucky so that the plaintiff was able to assert jurisdiction over the Indiana hospital.


Warriner v. Stanton (p. 116)

It is difficult to predict how R3 will deal with this case because the Reporters have not yet addressed statutes of limitation. If statutes of limitations are treated as conduct regulating or loss allocating the result would be the same in each case. Under the conduct regulation rule (R3 § 6.04), if conduct and injury take place in the same state that state’s law governs. Similarly, under the loss allocation rule (R3 § 6.07), when the relevant parties have central links to different states and conduct and injury occur in a single state, that state’s law will govern an issue of loss allocation. Here, both the conduct and injury took place in Delaware, so application of each rule would lead to the conclusion that Delaware law applies. But it is entirely possible that, when R3 addresses statutes of limitations, it will take a sui generis approach different from both the rule applicable to conduct regulating laws and the rule applicable to loss allocating laws.

Products Liability

Singh v. Edwards Lifesciences Corp. (p. 124)

The conflict in this products liability case concerns the availability of punitive damages. The conflict is between the law of California, which allows punitive damages, and the law of Washington, which does not. The defective heart monitor that destroyed the plaintiff’s heart was manufactured in California but the surgery in which the heart monitor was used and caused the plaintiff injury occurred in Washington. The first sentence in R3 § 6.11 tells us that the availability of punitive damages in products liability cases is covered by the choice of law rules for products liability in R3 § 6.10. Under R3 § 6.10(3), however, we are directed to apply the rules of §§ 6.01-6.09. Punitive damages are conduct regulating (R3 § 6.02(d)). Where conduct and injury take place in different states, the law of the state of conduct governs (R3 § 6.05). Thus, under R3, California law would govern. It should be noted, in this regard, that the second sentence of R3 § 6.11 goes on to tell us that punitive damages may not be awarded unless they are available under the law of at least two of the following states: (1) the defendant’s linked state; (2) the place of conduct; (3) the place of injury. Since the defendant is from California and the conduct took place in California it is the law of California that governs.

Rowe v. Hoffman-La Roche, Inc. (p. 127)

In this products liability case, the conflict was between New Jersey law, under which the manufacturer of a drug that carries warnings complying with FDA regulations benefits from a rebuttable presumption as to the adequacy of the warnings, and Michigan law, under which the manufacturer would benefit from a conclusive presumption of the adequacy of the warnings. The plaintiff lived in Michigan, while the defendant was in New Jersey.

Rowe seems clearly covered by R3 § 6.10(1)(a). The drug (Accutane) was delivered to the “first end user” in Michigan and Michigan is the plaintiff’s central link (he is a Michigan domiciliary), so the law of Michigan would govern. The result under R3 is consistent with the holding of the court. The Reporters’ note cites Rowe in support of this section.


Townsend v. Sears Roebuck and Co. (p. 137)

This case, involving an injury in Michigan to a Michigan resident, caused by a product imported from Illinois, is interesting because it presents three conflicts:

Strict liability: Illinois has adopted a rule of strict liability in tort for product design defects, while Michigan has not adopted the doctrine of strict liability, instead imposing a pure negligence standard for product liability actions based on defective design.

Cap on compensatory damages: Illinois had no cap on compensatory damages for noneconomic injuries, while Michigan imposed caps.

Punitive damages: Illinois law does not prohibit the recovery of punitive damages in product liability cases when appropriate. Under Michigan law, generally only compensatory damages are available.

Here are the results that would seem to follow from application of R3:

Strict liability – This is a product liability issue. Under R3 § 6.10(1)(a), the law of Michigan governs. It is the state of delivery to the first-end user and is the state of the plaintiff’s central link.

Caps on damages: Comment d to R3 § 6.10 indicates that that section addresses liability but not damages, and that issues related to damages are addressed in R3 §§ 6.01-6.09. The issue of caps on damages is an issue of loss-allocation. See R3 § 6.03(d). Under R3 § 6.07(2), we think that Illinoi law (no cap on compensatory damages) would govern. Conduct (design of the product) and injury took place in different states, leading to a presumption of application of law of the State of the conduct. The “unless” clause that could rebut that presumption is not relevant because here the plaintiff would not seek to apply the law of the state of injury inasmuch as it is unfavorable to the plaintiff.

Punitive damages – The first sentence in R3 § 6.11 tells us that the availability of punitive damages in products liability cases is covered by the choice of law rules for products liability in R3 § 6.10. Under either R3 § 6.10(1)(a) or R3 § 6.10(1)(b), it would appear that Michigan law (no punitive damages) would govern inasmuch as Michigan appears to be the state in which the lawn mower was first delivered and the state of the plaintiff’s central link. It should be noted, in this regard, that the second sentence of R3 § 6.11 goes on to tell us that punitive damages may not be awarded unless they are available under the law of at least two of the following states: (1) the defendant’s linked state; (2) the place of conduct; (3) the place of injury.

Cosme v. Whitin Machine Works (p. 149)

Here, an employee living in Massachusetts but working in Connecticut was injured there by an old piece of machinery sold to the Connecticut employer by a Massachusetts manufacturer.


Connecticut, but not Massachusetts, has a ten-year statute of repose that would bar an action against the manufacturer.

Statutes of repose relate to liability and, thus, are governed by the rules in R3 § 6.10. See R3 § 6.10, comment h. Under R3 § 6.10, it appears that Connecticut law would govern because “liability for injury caused by a product is determined by the law of … the state where the product was delivered to the first end user, if that state is also the plaintiff’s central link, or the place of injury, or the place of manufacture, or the defendant’s central link and the product was available in that state through ordinary commercial channels.” Here the product was delivered to the first end user in Connecticut and that is also the place of injury.

Application of Draft Third Restatement Rules to Contract Cases in the Casebook

Auten v. Auten (p. 203)

For purposes of determining the applicability of the presumptions in R3 §§ 8.07 and 8.08, the place of negotiating the contract, the place of making the contract, and the place of major performance are relevant. In this case, the contract was negotiated in New York and entered into in New York. Determining the place of major performance, however, is problematic. The wife’s performance called for under the contract was negative – she was not to “cause any complaint to be lodged against [the husband], in any jurisdiction …” While this negative performance (refraining from action) occurred everywhere, the parties understood that she would return to England (which she did), so perhaps analysis under R3 would proceed with the understanding that a major place of her performance was to be in England. The husband’s major performance was to pay money to a trustee for the account of the wife. The facts do not reveal whether the trustee was in New York or England. Perhaps it does not matter where the trustee, as payee of the payment, is located for purposes of determining the husband’s major performance, but that is not clear from the current draft. In any event, if the husband’s major performance is paying, that would take place in New York. It is not clear whether R3 assumes that one would examine the place of the husband’s major performance (New York) or the place of the wife’s major performance (England). If the place of performance to be examined is that of the husband (inasmuch as he was being sued for failure to pay), then the place of negotiation, the place of making the contract, and a place of major performance would all be in New York and, as a result, New York law would presumptively apply under both R3 § 8.07 and R3 § 8.08. On the other hand, the husband’s defense is based on the actions the wife took in England, so perhaps the major performance to be examined should be that of the wife in England, in which case the presumptions would not apply. If the presumptions do not apply, the applicable law would be determined by application of the general principles in R3 § 8.05.


Sturiano v. Brooks (p. 209) This would be a simple case under R3 § 8.10(2), which provides that conflict-of-laws issues relating to contracts for fire, surety, or casualty insurance are determined by the state that the parties understood would be the principal location of the insured risk during the term of the policy at the time of application. Under the facts of Sturiano, it seems clear that, at the time the Sturianos applied for the insurance, the principal location of the insured risk was New York. Thus, under R3, New York would apply to the interspousal claims issue.

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