Chapter 24-1 General Principles Governing Choice of Law in Texas

• Jurisdiction: United States

24-1 General Principles Governing Choice of Law in Texas

24-1:1 Texas Procedural Rules Applicable

Though Texas follows the approach of the Restatement (Second) of Conflicts in applying the most significant relationship test to determine what substantive law to apply, Texas applies its own procedural laws, even when the substantive law of another state must be applied.¹

Some bodies of law may appear procedural, but are substantive for purposes of the choice of law analysis. Although the admissibility of evidence is a procedural question, generally, for choice of law purposes,² the laws governing privileges are substantive; and Texas applies the law of the state with the most significant relationship to the privilege (usually the state where the communication was made).³ Similarly, witness competency rules as well as the parol evidence rule and statute of frauds are substantive rules to which the most significant relationship test applies.

24-1:2 Necessity of a Conflict

The first step in a choice of law analysis is to determine if the laws of the competing jurisdictions are in conflict. If there is no conflict, then there is no need to conduct a choice of law analysis.⁴

24-1:3 The Most Significant Relationship Test

With respect to the substantive law to be applied to a dispute, Texas follows the most significant relationship test in all cases (except those controlled by a valid choice of law clause)⁵ as set forth in the Restatement (Second) of Conflicts,⁶ and applies the law with the most significant relationship to the dispute.

Texas courts must follow a statutory directive as to the resolution of a choice of law issue. In the absence of a statutory directive, however, and regardless of whether the case sounds in contract or tort, the most significant relationship test of the Restatement (Second) of Conflicts begins with an analysis of the factors listed in Section 6. The factors the court must consider are:

• the needs of the interstate and international systems;
• the relevant policies of the forum;
• the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue;
• the protection of justified expectations;
• the basic policies underlying the particular field of law;
• certainty, predictability and uniformity of result; and
• ease in the determination and application of the law to be applied.⁷

24-1:4 Most Significant Relationship Test in Tort Cases

In a tort case, Section 145 sets forth the contacts to be taken into account in determining the state with the most significant relationship to the dispute under the principles stated in Section 6.⁸ The use of the word "include" indicates that the contacts listed in Section 145 are not necessarily exclusive, but the listed contacts are:

• the place where the injury occurred;
• the place where the conduct causing the injury occurred;
• the domicile, residence, nationality, place of incorporation and place of business of the parties; and
• the place where the relationship, if any, between the parties is centered.

Although Texas has abandoned the lex loci delecti rule (the law of the place of the injury), this contact is still the most important under Texas case law. Texas courts will

typically apply the law of the place of the injury,⁹ but have not done so where the accident occurred in another state but involved residents of Texas¹⁰ or where the accident occurred in Texas but involved residents of another state.¹¹

In fraud and misrepresentation cases, as a general rule, the law of the state where both the misrepresentation and reliance occurred will apply.¹² Where the reliance occurred in a state diffterent from where the false statement was made, the court should apply a number of factors to determine the governing law.¹³

In defamation cases, the law of the state where the publication occurred generally applies.¹⁴ In multistate defamation cases, such as with the publication of a book, periodical, etc., the law of the state of the plaintiff's domicile will often apply.¹⁵

24-1:5 Most Significant Relationship Test in a Contract Case

In a contract case, Section 188 sets forth the contacts to be taken into account in determining the state with the most significant relationship to the dispute under the principles stated in Section 6.¹⁶

• The place of contracting;
• The place of negotiation of the contract;
• The place of performance;
• The location of the subject matter of the contract; and
• The domicile, residence, nationality, place of incorporation and place of business of the parties.

Section 188 also provides that where the state of performance and the state of negotiation are the same, that state's law should ordinarily govern.¹⁷ The place of performance is ordinarily the most significant contact in a contract for services.¹⁸ Contracts for the repayment of money lent are generally governed by the law where repayment is required to be made.¹⁹ Contracts for the transportation of goods or persons are generally governed by the law of the state from which the goods or passengers depart.²⁰

24-1:6 Most Significant Relationship Test in Property Cases

Texas also follows the Restatement approach in property cases and in cases to determine a person's personal status. Generally, the law of the location of the land governs in actions involving real property.²¹ Personal property choice of law questions are governed generally by the Uniform Commercial Code choice of law rules, discussed in Chapter 24, Section 24-3:2.

24-1:7 Choice of Law Under the Uniform Commercial Code

The Uniform Commercial Code sets out a choice of law rule that applies generally to cases governed by the Code. It also sets out a number of choice of law provisions that govern particular issues under the Code.

The General choice of law rule under the Texas Uniform Commercial Code is that Texas law will apply to any transaction "bearing an appropriate relation" to Texas.²²

The Code also provides the following provisions that govern choice of law with respect to certain particular issues.

• Rights of Seller's Creditor Against Sold Goods: A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated.²³
• Goods Covered by Certificate of Title: Compliance or noncompliance with such a certificate is governed generally by the law of the issuing state.²⁴
• Choice of Law Clauses in a Consumer Lease: Choice of law clause in a consumer lease agreement choosing the law of a state other than the state of the lessee's residence is generally

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