Choice of law refers to a procedural issue in litigation which determines which jurisdiction’s laws are to be applied in the case at hand. The choice is usually between applying the forum state’s law or the laws of another jurisdiction which has an interest in the controversy. The forum state is the state where the court heaing the matter sits. An interested state can be any state that has some connection to the parties or the matters being litigated.
Choice of law issues often arises in contract disputes where the state in which the contract was entered into is different from the state in which the alleged breach of contract occurred. Contracts often include a choice of law clause to indicate the law that will apply in the event of a dispute.
There are three basic approaches to choice of law: 1) the traditional vested rights doctrine, 2) the various interests and analysis approach, and 3) the most significant relationship theory.
The various interests and analysis approach weighs the interest of the various states involved. This is done by applying the “comparative impairment” test, under which a court compares the extent of damage that the application each competing state’s laws would inflict on the competing states’ interests. Under this approach courts should choose the state whose laws would cause a lesser degree of impairment to competing state interests. In practice, this approach genreally increases the number of occasions when a forum state will apply its own law.