DEFINITIONS

SECTION 1. Definitions. For the purposes of sections 1 to 10 of this 2001 Act:

(1) “Law” means any rule of general legal applicability adopted by a state, whether that rule is domestic or foreign and whether derived from international law, a constitution, statute, other publicly adopted measure or published judicial precedent. Except for references to the law of Oregon, “law” does not include rules governing choice of law.

(2) “State” means the United States, any state of the United States, any territory, possession or other jurisdiction of the United States, any Indian tribe, other Native American group or Native Hawaiian group that is recognized by federal law or formally acknowledged by a state of the United States, and any foreign country, including any territorial subdivision or other entity with its own system of laws.

APPLICABILITY

SECTION 2. Applicability. Sections 1 to 10 of this 2001 Act govern the choice of law applicable to any contract, or part of a contract, when a choice between the laws of different states is at issue. Sections 1 to 10 of this 2001 Act do not apply if another Oregon statute expressly designates the law applicable to the contract or part of a contract. Sections 1 to 10 of this 2001 Act do not apply to any contract in which one of the parties is a financial institution, as defined by 15 U.S.C. 6827, as in effect on the effective date of this 2001 Act.

CONTRACTS GOVERNED BY OREGON LAW

SECTION 3. Specific types of contracts governed by Oregon law. Notwithstanding any other provision of sections 1 to 10 of this 2001 Act, but subject to the limitations on applicability imposed by section 2 of this 2001 Act, the law of Oregon applies to the following contracts:

(1) A contract for services to be rendered in Oregon, or for goods to be delivered in Oregon, if Oregon or any of its agencies or subdivisions is a party to the contract. The application of Oregon’s law pursuant to this subsection may be waived by a person authorized by Oregon’s law to make the waiver.

(2) A contract for construction work to be performed primarily in Oregon.

(3) A contract of employment for services to be rendered primarily in Oregon by a resident of Oregon.

(4)(a) A consumer contract, if:

(A) The consumer is a resident of Oregon at the time of contracting; and

(B) The consumer’s assent to the contract is obtained in Oregon, or the consumer is induced to enter into the contract in substantial measure by an invitation or advertisement in Oregon.

(b) For the purposes of this subsection, a consumer contract is a contract for the supply of goods or services that are designed primarily for personal, familial or household use.

RULES GOVERNING FORM OF CONTRACT,

CAPACITY TO CONTRACT AND CONSENT

SECTION 4. Validity of form. A contract is valid as to form if the contract meets the requirements prescribed either by the law chosen by the parties under sections 7 and 8 of this 2001 Act, the law applicable under section 3, 9 or 10 of this 2001 Act, or the law of the state from which any party or the party’s agent has assented to the contract unless that state has no other connection to the parties or the transaction.

SECTION 5. Capacity to contract. (1) A party has the capacity to enter into a contract if the party has that capacity under the law of the state in which the party resides or the law applicable to this issue under section 3, 9 or 10 of this 2001 Act.

(2) A party that lacks capacity to enter into a contract under the law of the state in which the party resides may assert that incapacity against a party that knew or should have known of the incapacity at the time the parties entered into the contract. If a party establishes lack of capacity in the manner provided by this subsection, the consequences of the party’s incapacity are governed by the law of the state in which the incapable party resides.

SECTION 6. Consent. (1) A party has consented to a contract if the law applicable under section 3, 9 or 10 of this 2001 Act so provides.

(2) In a consumer contract or employment contract, the consumer or employee whose assent to a contract was obtained in the state of the party’s residence, or whose conduct leading to the contract was primarily confined to that state, may invoke the law of that state to establish that the party did not consent to the contract or that the consent was not valid by reason of fraud or duress.

CHOICE OF LAW MADE BY PARTIES

SECTION 7. Choice of law made by parties. (1) Except as specifically provided by section 3, 4, 5, 6 or 8 of this 2001 Act, the contractual rights and duties of the parties are governed by the law or laws that the parties have chosen. The choice of law may extend to the entire contract or to part of a contract.

(2) The choice of law must be express or clearly demonstrated from the terms of the contract. In a standard-form contract drafted primarily by only one of the parties, any choice of law must be express and conspicuous.

(3) The choice of law may be made or modified after the parties enter into the contract. Any choice of law made or modified after the parties enter into the contract must be by express agreement.

(4) Unless the parties provide otherwise, a choice of law or modification of that choice operates retrospectively to the time the parties entered into the contract. Retrospective operation under the provisions of this subsection may not prejudice the rights of third parties.

SECTION 8. Limitations on a choice of law by the parties. (1) The law chosen by the parties pursuant to section 7 of this 2001 Act does not apply to the extent that its application would:

(a) Require a party to perform an act prohibited by the law of the state where the act is to be performed under the contract;

(b) Prohibit a party from performing an act required by the law of the state where it is to be performed under the contract; or

(c) Contravene an established fundamental policy embodied in the law that would otherwise govern the issue in dispute under section 9 of this 2001 Act.

(2) For purposes of subsection (1)(c) of this section, an established policy is fundamental only if the policy reflects objectives or gives effect to essential public or societal institutions beyond the allocation of rights and obligations of parties to a contract at issue.

LAW APPLICABLE IN THE ABSENCE

OF AN EFFECTIVE CHOICE BY THE PARTIES

SECTION 9. General rule. To the extent that an effective choice of law has not been made by the parties pursuant to section 7 or 8 of this 2001 Act, or is not prescribed by section 3, 4, 5, 6 or 10 of this 2001 Act, the rights and duties of the parties with regard to an issue in a contract are governed by the law, in light of the multistate elements of the contract, that is the most appropriate for a resolution of that issue. The most appropriate law is determined by:

(1) Identifying the states that have a relevant connection with the transaction or the parties, such as the place of negotiation, making, performance or subject matter of the contract, or the domicile, habitual residence or pertinent place of business of a party;

(2) Identifying the policies underlying any apparently conflicting laws of these states that are relevant to the issue; and

(3) Evaluating the relative strength and pertinence of these policies in:

(a) Meeting the needs and giving effect to the policies of the interstate and international systems; and

(b) Facilitating the planning of transactions, protecting a party from undue imposition by another party, giving effect to justified expectations of the parties concerning which state’s law applies to the issue and minimizing adverse effects on strong legal policies of other states.

PRESUMPTIVE RULES

SECTION 10. Presumptive rules for specific types of contracts. (1) To the extent that an effective choice of law has not been made by the parties pursuant to section 7 or 8 of this 2001 Act, or is not prescribed by section 3, 4, 5 or 6 of this 2001 Act, contracts described in subsection (2) of this section are governed by the law of the state specified in subsection (2) of this section unless a party demonstrates that the application of that law would be clearly inappropriate under the principles of section 9 of this 2001 Act.

(2)(a) Contracts involving the occupancy of real property, the land use of property or the recording of interests in real property are governed by the law of the state where the property is situated.

(b) Contracts for personal services are governed by the law of the state where the services are to be primarily rendered pursuant to the contract.

(c) Contracts for franchises, as defined in ORS 650.005, except for licensing clauses in such contracts, are governed by the law of the state where the franchise is to operate pursuant to the contract.

(d) Licensing contracts and licensing clauses in contracts for franchises, as defined in ORS 650.005, are governed by the law of the state where the licensor has its place of business or residence with the closest connection to the transactions between the parties. For purposes of this subsection, “licensing” means a grant of a privilege, created by contract, that allows one party, the licensee, to use the property or right of another party, the licensor.

(e) Agency contracts are governed by the law of the state where the agent’s duties are to be primarily performed.

MISCELLANEOUS

SECTION 11. (1) Except as provided in subsection (2) of this section, sections 1 to 10 of this 2001 Act apply to all contracts, whether entered into before, on or after the effective date of this 2001 Act, unless that application would violate constitutional prohibitions against impairment of contracts.

(2) Sections 1 to 10 of this 2001 Act do not apply to any choice of law that is at issue in an action or proceeding commenced before the effective date of this 2001 Act.

SECTION 12. The unit and section captions used in this 2001 Act are provided only for the convenience of the reader and do not become part of the statutory law of this state or express any legislative intent in the enactment of this 2001 Act.

Approved by the Governor May 21, 2001

Filed in the office of Secretary of State May 21, 2001

Effective date January 1, 2002

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