Choice of Law / Choice of Forum
Choice of law clauses specify which jurisdiction's substantive law governs a contract. Choice of forum (forum selection) clauses specify the courts authorized to hear disputes. Both are foundational for commercial contracts involving multi-state parties or transactions.
Choice of law clauses specify which jurisdiction's substantive law governs the interpretation and enforcement of a contract. Choice of forum (or "forum selection") clauses specify the courts or arbitral tribunals authorized to hear disputes arising from the contract. Both clause types are foundational to commercial contracts, particularly those involving parties or transactions in multiple states.
Choice of law enforceability
Under DeSantis, Texas courts generally enforce contractual choice-of-law clauses if (1) the chosen jurisdiction has a substantial relationship to the parties or the transaction, or there is another reasonable basis for the parties' choice; and (2) application of the chosen law would not be contrary to a fundamental policy of a state with a materially greater interest. The "fundamental policy" exception is invoked sparingly, most commercial choice-of-law clauses are enforced as written.
Choice of forum enforceability
Forum selection clauses are presumptively enforceable under Texas law. Mandatory forum clauses (specifying that disputes "shall" be litigated in a specific court) are enforced unless the resisting party shows the clause is unreasonable, fraud-induced, or contrary to public policy. Permissive forum clauses (specifying that a court "may" hear disputes) preserve party rights to litigate elsewhere.
Tex. Civ. Prac. & Rem. Code § 15.020
For "major transactions" (consideration exceeding $1 million), parties may by contract designate any Texas county as the mandatory venue. The statute overrides ordinary venue rules for qualifying contracts.
Choice-of-law and forum clauses are critical for predictability, they fix in advance the substantive rules and procedural setting that will apply to disputes. Sophisticated drafting addresses (1) substantive law selection; (2) exclusive vs. non-exclusive forum; (3) whether the clause covers tort claims arising from the contract relationship, not just breach; (4) carve-outs for injunctive relief in any jurisdiction.
Companion article: Contract Disputes in Texas