Because courts in each state may decide certain issues differently, a “choice-of-law” provision may be inserted into a contract to insure that a court applies a certain state’s law to any dispute related to such contract. Corporations will sometimes select Delaware law to govern contracts involving corporate law issues because of business oriented state statutes and a large body of corporate cases have been decided in that state. The decisions provide some degree of certainty as to how courts applying Delaware law would decide similar issues in the future.
A choice-of-law provision could determine the outcome of a future lawsuit. Also, under certain states’ law, the amount and types of monetary awards for injury may be limited. For example, the ability to obtain “punitive” awards in addition to compensation for actual losses varies from state to state.