Commercial contract provisions dictating choice-of-law, the applicable statute of limitations, and forum selection are important yet often overlooked portions of agreements.\u00a0 A recent Rhode Island Supreme Court decision presents important guidance that companies and individuals should consider when drafting, negotiating, and executing contracts.<\/p>\n
In Webster Bank, N.A. v. Rosenbaum<\/em>, 268 A.3d 556 (R.I. 2022), the court considered a \u201cGoverning Law\u201d provision in a loan agreement.\u00a0 The provision provided: \u201cGoverning Law<\/u>: Federal law and the law of the State of Connecticut (to the extent consistent with Federal law) govern this Agreement.\u201d\u00a0 The issue before the court was whether Rhode Island or Connecticut law should govern the statute of limitations applicable to the plaintiff\u2019s claim against the defendants.\u00a0 Although the \u201cGoverning Law\u201d provision stated that Connecticut law \u201cgovern[ed] th[e] Agreement[,]\u201d it did not specify the applicable statute of limitations or forum.\u00a0 The court declined to interpret the provision as encompassing those issues.\u00a0 Because the \u201cGoverning Law\u201d provision did not specifically dictate the choice of forum or the applicable statute of limitations, the court applied its own choice of law rules to determine the law of the jurisdiction that applies with respect to the statute of limitations.\u00a0 The court ultimately applied Rhode Island\u2019s statute of limitations, not Connecticut<\/p>\n Webster Bank<\/em> makes clear that commercial contract provisions must clearly specify choice of law, the applicable statute of limitations, and choice of forum.\u00a0 When contracts like the loan agreement in Webster Bank<\/em> fail to specify, for example, the applicable statute of limitations, Rhode Island courts will employ their own choice of law rules to determine the law of the jurisdiction that will apply to the dispute.\u00a0 The outcome of this determination can be unpredictable and can potentially have momentous consequences on the outcome and the parties\u2019 damages exposure.<\/p>\n Moving forward, parties should remain cognizant of Webster Bank<\/em>\u2019s directives with respect to drafting of choice of law, statute of limitations, and forum selection provisions.\u00a0 Choice of law and the statute of limitations can be outcome determinative, as the laws of different jurisdictions sometimes contain meaningful differences.\u00a0 Parties can avoid these potential pitfalls by carefully crafting distinct contract provisions that specify the law of the jurisdiction that governs the agreement, the applicable statute of limitations, and the forum.<\/p>\n \u201cSo choose governing law wisely, but also choose it thoroughly!\u201d[1]<\/a><\/p>\n [1]<\/a> Glenn West,\u00a0The Law You Choose to Govern Your Contract May Not Be the Law That Governs<\/em>, Weil\u00a0Insights,<\/em> (January 12, 2016), https:\/\/privateequity.weil.com\/insights\/contractual-choice-of-governing-law-and-statutes-of-limitations-the-law-you-choose-to-govern-your-contract-may-not-be-the-law-that-governs-the-applicable-statute-of-limitations-for-claims-aris\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Commercial contract provisions dictating choice-of-law, the applicable statute of limitations, and forum selection are important yet often overlooked portions of agreements.\u00a0 A recent Rhode Island Supreme Court decision presents important guidance that companies and individuals should consider when drafting, negotiating, and executing…<\/p>\n","protected":false},"author":7,"featured_media":656,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[204],"tags":[205],"class_list":["post-655","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-contract-provisions","tag-contract-provisions"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts\/655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/comments?post=655"}],"version-history":[{"count":0,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts\/655\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/media\/656"}],"wp:attachment":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/media?parent=655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/categories?post=655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/tags?post=655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}