Opinion ID: 867515
Heading Depth: 2
Heading Rank: 1

Heading: Applicability of the Restatement

Text: ¶ 7 The choice-of-law provision in the employment contract reads: This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas, without regard to the principles of conflicts [sic] of laws. (Emphasis added.) TIB claims this provision forecloses the application of conflict of laws principles set forth in the Restatement because the parties, by including the last phrase, expressed their unequivocal intent that Texas law control the relationship. TIB argues the court of appeals improperly overrode that intent by engaging in a § 187 analysis. TIB further contends that absent fraud or overreaching, parties are always free to preclude a § 187 analysis by choosing the state whose law will govern their relationship and the available remedies. These arguments are not sound and we do not adopt them. [2] ¶ 8 When more than one state has a relationship to or an interest in a contract, courts apply a conflicts analysis to determine which state's law should govern. Cardon, 173 Ariz. at 207, 841 P.2d at 202 (citing Restatement § 187). However, neither a statute nor a rule of law permitting parties to choose the applicable law confers unfettered freedom to contract at will on this point. See Restatement § 187 cmt. d. Consistent with this principle, Restatement § 187, comment g reads: Fulfillment of the parties' expectations is not the only value in contract law; regard must also be had for state interests and for state regulation. The chosen law should not be applied without regard for the interests of the state which would be the state of the applicable law with respect to the particular issue involved in the absence of an effective choice by the parties. Section 187 provides a mechanism by which to balance the interests of both the parties and the states. Therefore, when parties include an express choice-of-law provision in a contract, we will perform a § 187 analysis to ascertain the appropriate balance between the parties' circumstances and the states' interests. By so doing, we determine as a matter of law whether the provision is valid and thus whether it should govern the parties' contractual rights and duties.