In contracts, the parties often agree on a choice of law clause that will determine the controlling law before a dispute even arise. That way, a party doesn’t have to pay expensive fees to sue the other party in a jurisdiction that is far from his residence. Moreover, some states are more lenient than others in certain areas of law. For example, Connecticut and Iowa have very insurance-friendly laws. As a result, many insurance companies choose to relocate there.
The parties can also use a forum selection clause to choose the state in which the action will take place. The controlling law will be the law of this particular state or the law resulting from the application of the conflict of law rules of that state.
[Last updated in June of 2020 by the Wex Definitions Team]