Thailand Law Journal 2012 Fall Issue 1 Volume 15

Restatement (Second) Conflict of Laws 187 Law of the State Chosen by the Parties

1. The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.
2. The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could  not have resolved by an explicit provision in their agreement directed to that issue, unless either:
3. the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or
4. application of the law of the chosen state would be contrary to a fundamental policy of a state which has materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of 187, would be the state of the applicable law in the absence of an effective choice of law by the parties.¹³

Courts applying the Second Restatement approach examine the following factors to determine which jurisdiction has the materially greater interests in the couple’s prenuptial agreement: the place of contracting, the place of negotiating, place of performance, location of the subject matter and the domicile and residence of the parties to the contract.¹⁴ The court’s choice between the two Restatement approaches can be outcome determinative and potentially lead to an invalidation of the entire prenuptial agreement.¹⁵ Thus, marital parties must draft their prenuptial agreement with the court’s chosen restatement approach in mind. However, for many contracting spouses such a task is not practical. First, it is unlikely that contracting spouses will be able to predict ex ante which state jurisdiction will handle their divorce proceeding. The requirements needed to establish jurisdiction for a divorce proceeding substantially differs among the statutory laws of each state.¹⁶ Some states require at least one marital party to reside within the state for at least six months prior to filing for divorce. In other states, it is only required that one of the spouses be present within the state.¹⁷ These stringent and non-uniform jurisdictional requirements make it extremely difficult for marital parties to predict ex ante which jurisdiction will conduct their divorce. Therefore, marital parties will most likely be unable to determine which Restatement approach will be applied to their prenuptial agreement. This is especially true for couples in which one of the spouses is a citizen of another country. For these couples it is extremely difficult to predict which country, let alone which U.S. state will handle the couple’s divorce proceeding as the location of the marital domicile or the location of the couple at the dissolution of marriage is highly speculative. Therefore, it is unreasonable to require that soon-to-be spouses know the jurisdictional location of their hypothetical divorce proceeding in order to execute an enforceable prenuptial agreement. Unfortunately, as will discussed below, knowing which Restatement approach will be applied is only half the battle due to the inconsistency within each of the two Restatement approaches.

1. Inconsistencies Within Each Conflict of laws Approach

As referred to earlier, U.S. state courts are not realistically divided into only two clear approaches. In practice, there are numerous divisions within each of the two general Restatement approaches.

1. Disparities Within the First Restatement Approach

The jurisdictions which favor the First Restatement approach do not consistently define what constitutes the “last act” of the execution of a prenuptial agreement. This ambiguity has considerable consequences because what is considered the “last act” determines which state or country’s laws is applied to the prenuptial agreement. Some courts have found that the last act is the actual signing of the agreement, whereas others have found that the couple’s marriage is the last act necessary to validate the contract.¹⁸ The courts’ interpretation of the last act can mean the difference between applying the foreign nation’s laws or the forum state’s laws.

The public policy exception in the First Restatement approach is a source of considerable variance among courts that adhere to the lex loci approach. The public policy exception found in the First Restatement of Conflict of Laws allows a court to refuse to apply the law of the lex loci jurisdiction on the basis that to do so would violate a public policy of the forum state.¹⁹ However, what a court considers a violation of their state’s public policies varies significantly among U.S. state courts. For example, some courts consider any violation of the forum state’s law to be a violation of the forum state’s public policy²⁰ while other jurisdictions are more flexible.²¹ In Black v. Powers the Virginia Court of Appeals strictly applied the lex loci approach and applied the law of the lex loci jurisdiction.²² The prenuptial agreement had been signed in the Virgin Islands. Therefore, under a lex loci approach, the law of the Virgin Islands should apply to the prenuptial agreement barring that there is no public policy exception. Although the Virginia court noted that the prenuptial agreement violated the laws of the state of Virginia²³, the court did not discuss if the enforcement of the couple’s prenuptial agreement would violate any of the public policies of Virginia. Instead, the court rotely applied the law of the Virgin Islands with no mention that the public policy exception might apply. Black v. Powers stands in stark contrast to In Estate of Davis.²⁴ The prenuptial agreement had been signed in Florida. The court found that since the agreement violated Tennessee law it also violated the public policies of the state of Tennessee. Thus, the court found that the agreement was invalid in Tennessee and refused to enforce the couple’s agreement. The inconsistent interpretation of the First Restatement’s public policy exception is detrimental to the interests of the marital parties. Due to this inconsistency, it is extremely difficult for marital parties to predict whether their agreement will violate the public policy of the forum state. Therefore, marital parties cannot be assured that their prenuptial agreement will actually be enforced.

U.S. state courts that apply the First Restatementapproach vary in the extent to which they apply the laws of the lex loci jurisdiction. Some courts apply the lex loci jurisdiction’s law to all matters of validity, construction, and enforceability of the prenuptial agreement.²⁵ However, other courts only apply the lex loci jurisdiction’s law to the construction of the prenuptial agreement²⁶ . These jurisdictions apply the laws of the form state to any issues of the validity or enforcement of the prenuptial agreement. In Muchmore v Trask²⁷, the court found that the law of the jurisdiction in which the marital parties signed the agreement would govern whether the agreement was legally valid. However, the court determined that the law of jurisdiction where the contract was intended to be performed would govern the construction issues of the prenuptial agreement. Similarly in Lord v, Lord²⁸, the Connecticut court held that a couple’s prenuptial agreement would be governed by the laws of the forum state. The agreement had been signed in the Virgin Islands; nevertheless the court found that agreement would be subject to the laws of the jurisdiction in which the agreement would have operative effects. Therefore, the court applied the laws of the state of Connecticut. The Virginia court in Black v. Powers²⁹ took an entirely different approach. The court applied the lex loci jurisdiction’s laws for the determinations of validity, enforcement, and construction of the agreement. U.S. courts that follow the First Restatement approach vary greatly in the extent to which they apply the laws of the lex loci jurisdiction to a couple’s prenuptial agreement. Marital parties who wish to execute an enforceable prenuptial agreement cannot predict accurately which jurisdiction’s laws will be applied to their agreement. Therefore, the marital parties cannot predict the effects (if any at all) of the agreement that they sign.