The ability to contract allows parties to negotiate terms, including the choice of law provision, which determines the legal framework governing their agreement. However, whether a Texas court will enforce such provisions depends on several key factors.
When Will Texas Courts Honor a Choice of Law Provision?
Texas courts generally uphold a contractual choice of law provisions if:
- The Chosen State Has a Reasonable Relationship to the Parties or Transaction
Texas courts assess the connections between the parties, the agreement, and the selected jurisdiction. Texas courts typically defer to the chosen law if a legitimate relationship exists, recognizing parties’ autonomy in shaping their contractual rights.[1] - The Chosen Law Does Not Contravene Texas Public Policy
Even if a reasonable relationship exists, Texas courts may override the provision if Texas has a materially greater interest in the matter. If enforcing the chosen law would undermine Texas public policy—such as invalidating the contract or contradicting fundamental legal principles—Texas law may apply instead.[2]
When No Choice of Law Clause Exists
If a contract lacks a valid choice of law provision, Texas courts apply the law of the state with the most significant relationship to the dispute. This determination considers factors like the location of contract formation, negotiation, performance, and the parties’ domicile.[3]
Conclusion
While Texas courts generally respect parties’ choice of law provisions, enforcement hinges on whether the selected jurisdiction has a meaningful connection to the contract and whether applying its law aligns with Texas public policy.[4] Careful drafting can help ensure the provision withstands judicial scrutiny.
[1] See Russ Berrie & Co. v. Gantt, 998 S.W.2d 713, 717 (Tex. App. 1999); Gator Apple, LLC v. Apple Tex. Rests., Inc., 442 S.W.3d 521, 533 (Tex. App. 2014).
[2] See Russ Berrie & Co., 998 S.W.2d at 717; Lockheed Martin Corp. v. Gordon, 16 S.W.3d 127, 133 (Tex. App. 2000).
[3] DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 679 (Tex. 1990).
[4] See CMA-CGM (Am.), Inc. v. Empire Truck Lines, Inc., 416 S.W.3d 495, 500 (Tex. App. 2013); Presley v. Veredeling, 370 S.W.3d 425, 430 (Tex. App. 2012).
