Contractual Choice of Law and the Prudential Foundations of Appellate Review

Within the past decade, professional organizations interested in making the law better suited to commercial transactions have begun to advocate the proposition that contracting parties should have almost unlimited power to choose the law to govern their relationship. The new choice-of-law framework resulting from these reform efforts will provide parties with an expanded menu of legal regimes from which to choose when drafting their contract and, in turn, will lead to a more frequent use of choice-of-law clauses. Indeed, some have even suggested that omitting such a clause may soon become malpractice for the commercial lawyer. Given both the trend toward permitting unlimited contractual choice of law and the growing popularity of these clauses, it is worth pausing to examine how the judicial system might appropriately respond. In particular, this Article addresses a problem that has thus far been overlooked by both courts and commentators. That problem involves the gains and losses of appellate review of trial court rulings on the law of another state or nation. What, exactly, does judicial review of unsettled questions of foreign law accomplish? What is its price? These questions are of both considerable theoretical interest and immense practical importance. Their resolution calls for an inquiry into the allocation of judicial authority and in its production of outcomes in the real world. The purpose of this Article is to provide an answer to these and other questions. This Article suggests an approach to judicial review that will improve the operation of appellate courts while appropriately distributing authority among all levels of the judiciary. The moving Finger writes, and having writ, moves on. But it my be that having written, what we write is soon ereased.1 I. INTRODUCTION A. Historical Background The principle of "freedom of contract," popular among contract theorists in the nineteenth and early twentieth centuries, rests on the belief that respect for personal autonomy is a necessary complement to both the liberal political state and a free-market economy.2 More precisely, if the government enforces private agreements voluntarily entered into by parties seeking to order their business and personal affairs, then individual liberty is preserved,3 equality of opportunity is ensured,4 and the maximization of societal wealth can be achieved.5 IMAGE FORMULA19IMAGE FORMULA20 Notwithstanding its waning acceptance,6 freedom of contract has been offered as an appropriate foundational approach to legislation as diverse as the Uniform Computer Information Transactions Act ("U.C.LT.A."),7 the National Labor Relations Act of 1935,8 and state limited liability acts.9 IMAGE FORMULA22 Even more generally, freedom of contract means that parties should be free to choose, as a strategic matter, the legal rules they consider to be most beneficial given their interests.10 The most familiar example of this strategy is a contract term that specifies that the parties' bargain is to be governed by the positive law of a given jurisdiction.11 However, the fact that a policy in favor of enforcing contractual choice-of-law clauses might have significant instrumental value for realizing the right to personal autonomy and other core IMAGE FORMULA24 elements of liberalism12 does not necessarily mean that courts will recognize and protect the parties' choice without restrictions.13 In fact, their unwillingness to do so has had a long history. Indeed, earlytwentieth-century commentators attacked the very concept of party autonomy in choice of law as unacceptable "private legislation."14 After all, they wondered, how could private individuals "displace the law of the place where their acts are done by exercise of any choice of their own? …