Governing Law Clauses

Under the UCC, when a transaction bears a reasonable relation to the state and also to another state or nation, the parties may agree that the law of either the state or such other state or nation shall govern their rights and duties. (KRS § 355.1-301)

Kentucky generally enforces contractual choice of law clauses. Kentucky follows the Restatement (Second) of Conflict of Laws Section 187, which provides that 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. However, if 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 application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which would be the state of the applicable law in the absence of an effective choice of law by the parties, then the choice of law provision is not enforceable. Note that Kentucky recognizes choice of law and choice of forum provisions as separate and distinct from each other. (Padgett v. Steinbrecher, 355 S.W.3d 457 (2011)).