Choice-of-Law Clauses in Minnesota Contracts

What is a choice-of-law clause, and what does it do?

A choice-of-law clause names the state or country whose substantive law governs your contract. The usual form is one sentence, such as “This Agreement shall be governed by the laws of the State of New York.” Lawyers call the same clause a governing-law clause or a choice-of-law provision. When a court enforces it, the chosen law answers the questions that decide most contract disputes: what the words mean, whether a term is valid, and what a breach costs.

The choice can decide the case. In Milliken and Co. v. Eagle Packaging Co., 295 N.W.2d 377 (Minn. 1980), a personal guaranty said it “shall be governed by the Laws of the State of New York” and would continue until revoked by written notice. The guarantor said he had revoked it in a conversation with the creditor’s sales representative. The Minnesota Supreme Court applied New York law, held that his oral communications “do not operate to satisfy that requirement under New York law,” and reversed with directions to enter judgment for the creditor.

Naming the law in advance also spares the parties a fight over which law applies. Without a clause, a court works through Minnesota’s multi-factor choice-of-law test, described later in this guide, and the Minnesota Supreme Court has acknowledged in Jepson v. General Casualty Co. of Wisconsin, 513 N.W.2d 467 (Minn. 1994) that “Differences among the states in their laws and in their choice of law methods make predicting what law will apply to a case an uncertain exercise.” A clear clause reduces that uncertainty for the issues it covers.

A choice-of-law clause does not choose the court. A common quiz question states that a choice-of-law clause “specifies where a dispute will be settled.” The answer is false: a forum-selection clause, also called a choice-of-venue clause, sets the place of the dispute, as the venue section below explains.

When will a Minnesota court enforce a choice-of-law provision?

Minnesota courts enforce a contractual choice of law that the parties made in good faith. In Combined Insurance Co. of America v. Bode, 247 Minn. 458, 77 N.W.2d 533 (1956), the Minnesota Supreme Court said it is “committed to the rule that the parties, acting in good faith and without an intent to evade the law, may agree that the law of either state shall govern.” The Minnesota Court of Appeals summed up the case law in Hagstrom v. American Circuit Breaker Corp., 518 N.W.2d 46 (Minn. Ct. App. 1994): “Minnesota traditionally enforces parties’ contractual choice of law provisions.”

A court deciding a challenge to the clause asks three questions:

1. Did the parties choose the law in good faith, without an intent to evade Minnesota law? In Hagstrom, the court noted that the Minnesota sales representatives’ partnership “was given time to review the agreement and did not object to the choice of law provision,” and that no evidence showed North Carolina law was selected in bad faith.
2. Can the chosen law constitutionally apply to the deal? Hagstrom held that applying North Carolina law was “constitutional because American Circuit has significant contacts with North Carolina,” where the manufacturer had its principal place of business.
3. Does a Minnesota statute override the choice for this kind of contract, or does a Minnesota policy outweigh it? The next three sections cover the UCC rule for goods, public policy, and the overriding statutes.

A clause fails when one of these questions goes against it: the parties chose the law to evade Minnesota law, the chosen place has no real connection to the deal, or a Minnesota statute or policy displaces the choice.

What is the “reasonable relation” test under the UCC for goods contracts?

For contracts for the sale of goods, the controlling rule is statutory. Under Minn. Stat. § 336.1-301(a), when a transaction “bears a reasonable relation to this state and also to another state or nation,” the parties “may agree that the law either of this state or of such other state or nation shall govern their rights and duties.” In plain terms, you can choose another state’s or country’s law for a goods deal only if the deal is connected to that place as well as to Minnesota. A choice of a place with no reasonable relation to the transaction is not “an agreement effective under subsection (a),” so subsection (b)’s default takes over: the Minnesota Uniform Commercial Code applies “to transactions bearing an appropriate relation to this state.”

Subsection (c) limits the choice further. It lists specific UCC provisions, including the lease rules in § 336.2A-105 (leased goods covered by a certificate of title) and § 336.2A-106 (consumer leases), the bank deposits and collections rule in § 336.4-102, and the secured-transactions rules in §§ 336.9-301 through 336.9-307. Where one of those provisions “specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified.” For Article 9 perfection and priority, Minn. Stat. § 336.9-301 generally points to the law of the jurisdiction where the debtor is located, so the parties’ label on the security agreement does not control those questions.

What public-policy limits does Minnesota recognize on choice-of-law clauses?

A Minnesota court weighs any Minnesota policy against the state’s policy of enforcing the parties’ choice. In Hagstrom, the sales representatives argued that the Termination of Sales Representatives Act expressed a Minnesota policy that should displace their North Carolina clause. The Court of Appeals could not “say that this policy interest, in light of all the facts of this case, overrides Minnesota’s longstanding policy of enforcing contractual choice of law provisions,” and it enforced the clause.

The firmer limits come from statutes that expressly void a contrary clause, listed in the next section. For sales of goods, the UCC adds one more limit: under Minn. Stat. § 336.2-302, a court that finds “the contract or any clause of the contract to have been unconscionable at the time it was made” may refuse to enforce the contract or may enforce the rest of the contract without the unconscionable clause. A choice-of-law clause is a clause of the contract, so this rule reaches it. The separate question of contracts that a statute makes illegal is covered in our legality doctrine article.

In my practice, the public-policy argument rarely comes up between two companies that both had lawyers and chose a state with plausible law. It comes up where one side is a Minnesota employee, franchisee, dealer, sales representative, or small-business owner and the other side drafted away protections the legislature enacted for that relationship.

Which Minnesota statutes override a contrary choice-of-law clause?

Several Minnesota statutes void or limit a clause choosing other law for a specific kind of relationship. If your contract is in one of these categories, a court can refuse to apply the clause to the protections the statute covers.

Statute	Contracts it covers	What it says about a clause choosing other law
Minn. Stat. § 181.988, subd. 3	Terms an employer requires, as a condition of employment, of an employee who primarily resides and works in Minnesota	A term that would “deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota” is voidable by the employee, and then “Minnesota law shall govern the dispute”
Minn. Stat. § 80C.21	Franchises acquired by Minnesota residents or Minnesota-organized entities, or to be operated in Minnesota	Any provision, “including any choice of law provision,” that waives compliance with the Minnesota Franchise Act “is void”
Minn. Stat. § 80F.18	Marketing agreements for a dealer marketing motor vehicle fuel in Minnesota	“The laws of the state of Minnesota shall govern,” venue is in Minnesota, and a choice-of-law or venue provision that waives the chapter “is void”
Minn. Stat. § 325E.37, subd. 7	Sales representative agreements covered by the Termination of Sales Representatives Act	A term applying the “choice of law of any other state,” choosing venue in another state, or waiving the section “is void and unenforceable”
Minn. Stat. § 337.10, subd. 1	Building and construction contracts to be performed in Minnesota	A provision “making the contract subject to the laws of another state,” or requiring dispute resolution in another state, is “void and unenforceable”
Minn. Stat. § 336.2A-106	Consumer leases of goods	A choice of law other than that of the place where the lessee signed, resides, or will use the goods “is not enforceable”

Subdivision 3 of the noncompete statute “applies only to claims arising under this section,” and for its purposes “adjudication includes litigation and arbitration.” The statute applies to contracts and agreements entered into on or after July 1, 2023, under the effective-date clause in Laws 2023, chapter 53, article 6, section 1. For those agreements, subdivision 2 also makes any covenant not to compete “void and unenforceable” unless it falls within the exceptions for the sale or dissolution of a business. Our noncompete article covers the mechanics.

The sales-representative statute protects a representative who lives or has a principal place of business in Minnesota, or whose territory includes part or all of Minnesota. The legislature added subdivision 7 in 2014, and its bans on a choice of another state’s law and on a waiver of the section apply to sales representative agreements “entered into, renewed, or amended on or after” August 1, 2014 (Laws 2014, chapter 165). The ban on choosing venue in another state came in 2022 and applies to agreements “entered into, renewed, or amended after” August 1, 2022 (Laws 2022, chapter 51). Our sales representatives termination article covers the mechanics.

Each statute above names a relationship the legislature chose to protect and limits the parties’ freedom to choose other law for it. Before relying on a clause choosing other law, check whether the statute that regulates your industry has its own anti-waiver language.

How do courts handle choice-of-law clauses in international contracts?

A contract with a foreign party can choose a foreign country’s law, and the same Minnesota rules apply to that choice. For a sale of goods, Minn. Stat. § 336.1-301(a) allows the law of “another state or nation” when the transaction bears a reasonable relation to it. For other contracts, the Minnesota Court of Appeals applied the Bode good-faith test to a prenuptial agreement signed in Finland, whose clause stated, in English translation, that Finnish law “will be applicable to our matrimonial property rights.” In Koivu v. Koivu, Nos. A23-0890, A23-1267 (Minn. Ct. App. Oct. 14, 2024), a nonprecedential decision that other courts may consider but are not required to follow, the court affirmed the application of Finnish law. It held that the wife’s evidence, including her statement that she “did not understand” the clause, could not prove bad faith or “an intent to evade Minnesota law.”

When a contract has no clause, Minnesota’s choice-of-law analysis already accounts for cross-border cases: one of the five factors in Jepson v. General Casualty Co. of Wisconsin, 513 N.W.2d 467 (Minn. 1994) is “maintenance of interstate and international order.”

Are international contracts subject to Minnesota statutory overrides?

A clause choosing a foreign country’s law does not escape the Minnesota statutes whose words reach any choice of law. The Franchise Act voids a waiver made through “any choice of law provision” (Minn. Stat. § 80C.21). The noncompete statute protects an employee from losing “the substantive protection of Minnesota law” (Minn. Stat. § 181.988, subd. 3). The motor fuel statute provides that “The laws of the state of Minnesota shall govern” covered marketing agreements (Minn. Stat. § 80F.18). The consumer-lease rule refuses a choice of law of “a jurisdiction other than” the places tied to the lessee (Minn. Stat. § 336.2A-106). None of those phrases is limited to other states.

The construction and sales-representative statutes are worded differently. Minn. Stat. § 337.10, subd. 1, voids a clause making a Minnesota construction contract “subject to the laws of another state,” and Minn. Stat. § 325E.37, subd. 7, voids a term applying the “choice of law of any other state.” Other Minnesota statutes name foreign countries expressly: the UCC provision says “another state or nation,” and the limitations borrowing statute defines “state” to include “a foreign country.” If your cross-border contract covers a Minnesota construction project or a sales representative protected by § 325E.37, the safer course is to choose Minnesota law rather than rely on that difference in wording. Subdivision 7 of § 325E.37 also voids any term that includes “a waiver of any provision of this section.”

Are choice-of-law clauses enforceable in consumer contracts?

Often yes, but four limits apply when a business imposes another state’s law on Minnesota consumers.

• The good-faith test still applies. Under Combined Insurance Co. of America v. Bode, the parties may choose the governing law when “acting in good faith and without an intent to evade the law,” so a clause chosen to strip Minnesota consumers of Minnesota protections gives the consumer an argument that the clause fails that test.
• Consumer leases have a statutory rule. Under Minn. Stat. § 336.2A-106(1), if the law chosen in a consumer lease “is that of a jurisdiction other than a jurisdiction in which the lessee signed the lease or in which the lessee resides at the time the lease agreement becomes enforceable or within 30 days after that or in which the goods are to be used, the choice is not enforceable.” Subsection (2) applies the same treatment to a chosen court “that would not otherwise have jurisdiction over the lessee.”
• Unconscionability reaches the clause in a sale of goods. Minn. Stat. § 336.2-302 lets a court refuse to enforce “any clause of the contract” it finds unconscionable at the time the contract was made.
• A take-it-or-leave-it forum clause is harder to enforce. The Minnesota Supreme Court treats a forum-selection clause in an adhesion contract that is the product of unequal bargaining power as unreasonable, though boilerplate in a printed form is not enough by itself (Hauenstein & Bermeister, Inc. v. Met-Fab Industries, Inc., 320 N.W.2d 886 (Minn. 1982)).

If you sell to Minnesota consumers, I suggest choosing Minnesota law, because a clause that takes away a consumer’s home-state protections gives the consumer the bad-faith and unconscionability arguments above, and in a consumer lease the choice is unenforceable outright.

How does choice of law affect contract termination rights?

The governing law decides how the contract’s termination terms are read and enforced, including what happens when a notice falls short of what the contract requires. In Hagstrom, North Carolina law governed a sales representative agreement that either party could end on 30 days’ written notice, and the Court of Appeals held the agreement “effectively terminated” 30 days after the notice arrived, even though Minnesota’s statute then required 90 days’ notice.

Minnesota statutes protect termination rights in franchise and sales-representative relationships regardless of the contract’s choice of law:

Relationship	Minnesota termination rule	Why a contrary choice of law does not change it
Franchise (Minn. Stat. § 80C.14, subds. 3 and 4)	Good cause, plus written notice stating all the reasons at least 90 days in advance and 60 days to cure, with immediate termination allowed in three listed situations; unless the franchisee failed to cure a good-cause default, no refusal to renew without written notice at least 180 days before the franchise expires and an opportunity to operate long enough to recover the franchise’s fair market value as a going concern, and never a refusal made to convert the franchisee’s premises to the franchisor’s own operation	Section 80C.21 voids any choice-of-law provision that has the effect of waiving compliance with the Franchise Act
Sales representative (Minn. Stat. § 325E.37, subds. 2 to 4)	Good cause and written notice of the reasons at least 90 days in advance, with 60 days to cure, though notice is effective immediately for six listed grounds such as bankruptcy or failure to forward customer payments; unless the representative failed to cure a good-cause default, written notice of nonrenewal at least 90 days before the agreement expires, with an agreement of indefinite duration treated as expiring 180 days after written notice; commissions on sales made before termination or the end of the notice period, whichever is later	Subdivision 7 voids a choice of another state’s law in agreements entered into, renewed, or amended on or after August 1, 2014

For any other relationship, write the notice period, the grounds, and any cure right into the contract itself, because the chosen law fills whatever gaps the termination clause leaves.

Can choice-of-law clauses affect arbitration agreements?

Yes. A general governing-law clause can decide which rules govern the arbitration itself, and two U.S. Supreme Court decisions reached different results on similar clauses. When a contract evidences “a transaction involving commerce,” the Federal Arbitration Act makes its written arbitration provision “valid, irrevocable, and enforceable,” subject to ordinary contract defenses and an exception in chapter 4 of the Act (9 U.S.C. § 2). Within that federal rule, the parties’ choice of law can shape the arbitration:

• In Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468 (1989), a construction contract said it “shall be governed by the law of the place where the Project is located.” The California Court of Appeal read that clause to bring in California’s arbitration rules, including one that let a court stay the arbitration while related litigation with third parties went forward. The Supreme Court declined to disturb that reading of the contract and held that the Federal Arbitration Act did not preempt the California rule, because parties “are generally free to structure their arbitration agreements as they see fit.”
• In Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), a brokerage agreement said it “shall be governed by the laws of the State of New York,” and New York allowed courts, but not arbitrators, to award punitive damages. The Supreme Court read the clause to cover “substantive principles that New York courts would apply, but not to include special rules limiting the authority of arbitrators,” construed the ambiguity against the brokerage firm that drafted the form, and held that the arbitrators’ punitive damages award “should have been enforced.”

The drafting point from both cases: if you want a particular law to govern the arbitration agreement and the arbitration procedure, say so separately from the law that governs the merits. The same point matters across borders. Under the New York Convention, a court may refuse to recognize a foreign award, at the request of the party resisting it, on proof that the arbitration agreement “is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made” (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. V(1)(a)).

Several Minnesota statutes reach arbitration directly. The noncompete statute treats out-of-state arbitration like an out-of-state lawsuit, because for its choice-of-law and venue rule “adjudication includes litigation and arbitration” (Minn. Stat. § 181.988, subd. 3). The construction statute voids a requirement that “any litigation, arbitration, or other dispute resolution process on the contract occur in another state” (Minn. Stat. § 337.10, subd. 1). The sales-representative statute makes arbitration the “sole remedy” for a manufacturer, wholesaler, assembler, or importer that alleges a violation, lets the representative choose court instead, and applies Minnesota’s Uniform Arbitration Act (Minn. Stat. § 325E.37, subd. 5). For franchises, the commissioner’s rule against requiring a franchisee to waive forum rights “shall not bar an exclusive arbitration clause” (Minn. R. 2860.4400, item J). For how arbitration clauses and venue terms conflict, see our arbitration and venue article.

How do choice-of-law and choice-of-venue clauses interact?

A choice-of-law clause picks the rules, and a forum-selection clause, also called a choice-of-venue clause, picks the court or arbitral forum. Courts test the two clauses separately. In Hauenstein & Bermeister, Inc. v. Met-Fab Industries, Inc., 320 N.W.2d 886 (Minn. 1982), the Minnesota Supreme Court held that a forum-selection clause “should be given effect unless it is shown by the party seeking to avoid the agreement that to do so would be unfair or unreasonable.” The court grouped the grounds into “(1) the chosen forum is a seriously inconvenient place for trial; (2) the choice of forum agreement is one of adhesion; and (3) the agreement is otherwise unreasonable.” Quoting the U.S. Supreme Court’s forum-selection decision in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the court said a forum is “seriously inconvenient” only if a party would be “effectively deprived of a meaningful day in court.” The court then affirmed the dismissal of a Minnesota buyer’s suit against a Florida seller because their freely negotiated contract chose Florida as the venue.

The construction, sales-representative, noncompete, and motor fuel statutes in the table above restrict an out-of-state forum as well as out-of-state law (for a sales representative agreement, one entered into, renewed, or amended after August 1, 2022); the motor fuel statute, for example, provides that “venue for all actions shall be the state of Minnesota.” The Franchise Act does not mention venue, but the commissioner’s franchise rule bars requiring a franchisee to waive rights to any “forum” the law provides, while allowing “an exclusive arbitration clause.”

Where the case is filed also matters for the choice-of-law clause, because the forum’s choice-of-law rules decide whether to honor it. As the Eighth Circuit put it in Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., 111 F.3d 1386 (8th Cir. 1997), “In a diversity case, a federal court applies the choice of law rules of the forum state.” A Minnesota statute that voids your clause binds a Minnesota court, while a court elsewhere decides under its own rules whether to honor the clause.

How have Minnesota courts ruled on choice-of-law clauses?

These decisions show the clause at work in Minnesota courts and in a federal appeals court applying Minnesota law:

Decision	Law the clause chose	What the court did
Milliken and Co. v. Eagle Packaging Co. (Minn. 1980)	New York	Applied New York law, under which the guarantor’s oral revocation did not satisfy the guaranty’s written-notice requirement, and directed judgment for the creditor
Hagstrom v. American Circuit Breaker Corp. (Minn. Ct. App. 1994)	North Carolina	Enforced the clause against Minnesota sales representatives, so the contract’s 30-day termination notice governed instead of the 90-day notice in Minnesota’s statute
Northwest Airlines, Inc. v. Astraea Aviation Services, Inc. (8th Cir. 1997)	Minnesota	Applied the clause to tort-styled claims closely related to the contracts, and a claim under a Texas statute failed
Koivu v. Koivu (Minn. Ct. App. 2024, nonprecedential)	Finland	Enforced the clause for matrimonial property rights; claims for need-based attorney fees fell outside it, and Minnesota law applied to them

Hagstrom relied in part on the fact that the sales-representative act then “does not contain a similar provision restricting choice of law provisions.” For an agreement entered into, renewed, or amended on or after August 1, 2014, Minn. Stat. § 325E.37, subd. 7, now voids the kind of clause Hagstrom enforced.

What does a choice-of-law clause cover, and what happens if it is ambiguous?

A choice-of-law clause covers what its words cover. In Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., Northwest’s refurbishment contracts with a Texas aircraft-maintenance company said they “shall be governed by and interpreted in accordance with the laws of the State of Minnesota.” The Eighth Circuit applied that clause to the Texas company’s negligent performance, misrepresentation, deceptive trade practices, and unjust enrichment claims, because those claims were “closely related to the interpretation of the contracts,” and it decided the Texas company’s defamation claims under Minnesota’s general choice-of-law factors instead of the clause. In Koivu v. Koivu, the Minnesota Court of Appeals assumed, without deciding, that the Northwest Airlines approach reflects Minnesota law, and held that a clause limited to “matrimonial property rights” did not reach claims for need-based attorney fees.

When the clause’s words are unclear, Minnesota courts construe the ambiguity against the party that wrote it. In Combined Insurance Co. of America v. Bode, the Minnesota Supreme Court noted that under Illinois law “in case of ambiguity, a contract should be construed against its author,” and that “Minnesota follows the same rule.” The U.S. Supreme Court applied the same principle to a choice-of-law clause in Mastrobuono, covered in the arbitration section above. A claim that falls outside the clause is decided under Minnesota’s default choice-of-law rules, described next, so name every category of claim you want the clause to govern.

What choice-of-law rules apply if the clause is unenforceable or missing?

Minnesota’s general choice-of-law rules decide. For a sale of goods, Minn. Stat. § 336.1-301(b) applies the Minnesota UCC “to transactions bearing an appropriate relation to this state.” For other contracts, the Minnesota Supreme Court in Jepson v. General Casualty Co. of Wisconsin set out the steps: first, whether “the choice of one state’s law over another’s creates an actual conflict”; second, whether “the law of both states can be constitutionally applied”; and third, five choice-influencing factors, “(1) predictability of result; (2) maintenance of interstate and international order; (3) simplification of the judicial task; (4) advancement of the forum’s governmental interest; and (5) application of the better rule of law.”

The factors can point away from Minnesota even for a Minnesota resident. In Jepson, a Minnesota resident’s insurance policy covered vehicles mostly registered in North Dakota, listed insureds at a North Dakota address, and was priced at North Dakota rates. The court applied North Dakota law because predictability and the maintenance of interstate order outweighed Minnesota’s interest in compensating an injured resident.

Two of the overriding statutes name the replacement law: once the employee voids the term, the noncompete statute provides that “Minnesota law shall govern the dispute,” and the motor fuel statute applies Minnesota law to covered marketing agreements outright. An aggressive clause aimed at a Minnesota statute can therefore end with Minnesota law applied anyway, while a measured clause, choosing a place with a real connection and leaving the Minnesota statutes alone, is more likely to do what you wanted.

What common conflicts arise between a governing-law clause and Minnesota statutes?

Statute of limitations: Minnesota’s borrowing statute

A clause choosing another state’s law usually brings that state’s deadline for suing with it. Under Minn. Stat. § 541.31, subd. 1, “if a claim is substantively based: (1) upon the law of one other state, the limitation period of that state applies.” A claim based on the law of more than one state takes “the limitation period of one of those states chosen by the law of conflict of laws of this state,” and Minnesota’s own limitation period governs every other claim. Minn. Stat. § 541.32 adds that the other state’s “statutes and other rules of law governing tolling and accrual apply in computing the limitation period.” For these sections, Minn. Stat. § 541.30 defines “state” to include “a foreign country,” so a claim based on a foreign country’s law takes that country’s period.

The rule has limits:

• If a claim arose outside Minnesota and is barred where it arose, a Minnesota resident who has owned the claim since it accrued may still sue in Minnesota if the claim is not barred under Minnesota’s statute of limitations (§ 541.31, subd. 2).
• Minnesota’s period applies if the other state’s period “is substantially different from the limitation period of this state and has not afforded a fair opportunity to sue upon, or imposes an unfair burden in defending against, the claim” (Minn. Stat. § 541.33).
• The borrowing rules apply “to claims arising from incidents occurring on or after August 1, 2004” (Minn. Stat. § 541.34).

Before you choose another state’s law, compare its limitation period for contract claims with Minnesota’s; our Minnesota statutes of limitations page lists Minnesota’s deadlines.

Limits on liability and indemnity

A governing-law clause cannot rescue an indemnity that Minnesota’s construction statutes forbid. Under Minn. Stat. § 337.02, an indemnification agreement in a building and construction contract “is unenforceable except to the extent that” the injury or damage is attributable to the negligent or otherwise wrongful act or omission of the promisor or those working for it, with a separate exception for environmental strict liability. Because Minn. Stat. § 337.10 voids a clause making a contract for a Minnesota project “subject to the laws of another state,” the parties cannot use the governing-law clause to escape the limit in § 337.02.

Consumer-protection claims

Choosing a law can also decide which consumer-protection statutes apply. In Northwest Airlines, the contracts’ Minnesota clause defeated a claim under the Texas Deceptive Trade Practices Act because the claim “rests on a Texas statute not available under Minnesota law.” That case was a dispute between two businesses; for a consumer, the limits in the consumer-contract section above also apply.

How can a business handle a multi-jurisdictional or international contract?

A business that contracts across states or countries can keep one law in charge of the deal by making five decisions in the contract itself:

1. Choose one governing law with a real connection to the deal, such as a party’s home state or country or the place of performance, and say that it covers contract, tort, and statutory claims.
2. For an international sale of goods, decide whether the United Nations Convention on Contracts for the International Sale of Goods (CISG) should apply. The CISG “applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States” (CISG art. 1), the Convention has been in force for the United States since January 1, 1988 (UNCITRAL status table), and article 6 lets the parties “exclude the application of this Convention.” If you want only one country’s domestic law to apply, say in the contract that the CISG does not apply.
3. Choose a forum whose decision you can enforce where the other party’s assets are. For a cross-border contract, consider arbitration: under the New York Convention, each contracting state “shall recognize arbitral awards as binding and enforce them,” refusing only on the grounds the Convention lists, and U.S. courts enforce the Convention under 9 U.S.C. § 201. Before choosing a court instead, ask a lawyer in the other party’s country whether a judgment from that court would be enforced there.
4. Name the law that governs the arbitration agreement and the arbitration procedure, for the reasons Volt, Mastrobuono, and article V(1)(a) of the New York Convention show in the arbitration section above.
5. Check the mandatory rules where the work happens. A clause choosing foreign law does not displace the Minnesota franchise, noncompete, motor fuel, and consumer-lease statutes, and a lawyer in the other country can tell you which of its rules a contract cannot override.

How should I draft a choice-of-law clause to maximize enforceability?

Five drafting choices make the clause more likely to be enforced.

1. Pick a law with a real connection to the deal. A party’s headquarters, place of incorporation, or principal place of performance is the natural anchor. Hagstrom upheld the chosen law in part because the manufacturer had “significant contacts” with the chosen state, and the UCC requires a reasonable relation for a goods contract.
2. Use broad scope language. “This Agreement, and any claims arising out of or relating to it, including tort, statutory, and equitable claims” reaches further than “This Agreement shall be governed by.” Northwest Airlines and Koivu show courts reading the clause by its words, so write the words to cover every claim you want governed.
3. Know what the chosen law brings with it. Under Minnesota’s borrowing statute, the chosen state’s limitation period usually comes with its substantive law, and in an international sale of goods the CISG applies between parties in Contracting States unless you exclude it.
4. Build the clause around the Minnesota statutes. If the contract touches Minnesota employees, franchisees, motor fuel dealers, sales representatives, construction projects, or consumer lessees, choose Minnesota law for those relationships or write the clause to yield to those statutes. Add a severability provision stating that the parties want the rest of the agreement enforced if any part is held unenforceable; our integration-clause discussion explains a related drafting habit.
5. Pair the clause with a forum-selection or arbitration clause that fits. A choice-of-law clause without a forum clause leaves you arguing choice-of-law rules in whatever court the other side picks. For arbitration, state separately which law governs the arbitration agreement and procedure.

In my practice, the clauses that survive a challenge are usually the ones written with the Minnesota statutes in view.

Choice-of-law clause example

Here is a sample governing-law and venue clause for a contract between two businesses, assembled from the drafting points above. Replace the bracketed terms, and if you choose another state’s or country’s law, check the statute table above first.

Governing Law. This Agreement, and every claim or cause of action (whether in contract, tort, statute, or otherwise) arising out of or relating to this Agreement or its negotiation, execution, or performance, is governed by the laws of the State of [Minnesota], without regard to its conflict-of-laws rules. [For an international sale of goods: The United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement.]

Venue. Each party consents to the exclusive jurisdiction of the state and federal courts located in [County], [Minnesota], for any action arising out of or relating to this Agreement.

If the parties choose arbitration instead of a court, replace the venue paragraph with an arbitration clause that names the arbitral rules, the place of arbitration, and the law that governs the agreement to arbitrate.

Bottom line

A Minnesota court will usually enforce your choice-of-law clause if you chose the law in good faith, the chosen state or country has a real connection to the deal, the UCC’s reasonable-relation rule is met for a sale of goods, and no Minnesota statute overrides the choice for your kind of contract. The statutes to check first protect employees bound by noncompetes, franchisees, motor fuel dealers, sales representatives, Minnesota construction projects, and consumer lessees. Write the clause to cover every claim you care about, decide which deadline for suing and which treaty rules come with the chosen law, and pair it with a forum or arbitration clause you can enforce. For a fuller view of how these clauses sit alongside the rest of a commercial contract, the contracts practice area is the entry point. If you would like an attorney to analyze a specific clause, or a contract where one of these statutes may apply, email [email protected] with a short description of the deal, and hold any confidential documents until an intake and conflict check are complete.