Okla. Stat. tit. 12A § 1-102
This article applies to a transaction to the extent that it is governed by another article of the Uniform Commercial Code.
Okla. Stat. tit. 12A, § 1-102
Oklahoma Code Comment
This section is new. It makes clear the limits of the scope of Article 1, which only applies to Uniform Commercial Code (UCC) issues. While Article 1 has the broadest scope of any UCC Article, being applicable to any issue governed by any UCC provision, it does not apply to issues outside the scope of the UCC, except possibly by analogy.
An example is usury. While UCC Article 3 applies to many issues relating to negotiable instruments (including negotiable promissory notes), Article 3 does not determine whether a promissory note bears interest at a usurious rate. Therefore, the Article 1 choice of law provision at section 1-301 does not necessarily determine the applicable law as to issues involving usury. However, UCC section 1-301 (as enacted in Oklahoma, retaining the text of old section 1-105 ) reflects the traditional deference to a contractual choice of law clause so long as the parties' choice bears a reasonable relation to the transaction, and courts commonly apply this choice of law rule to a variety of issues (including some outside the UCC).
This may require careful line-drawing, as between the UCC and non-UCC issues even when, e.g., the Article 1 rule is essentially the same as the non-UCC rule. For example, in Evans v. Harry Robinson Pontiac-Buick, 983 S.W.2d 946 (S.Ct Ark. 1999), the issue was whether Arkansas or Texas law applied to determine whether a retail installment sales contract (RISC) was usurious. Because the RISC arose from a sale of goods governed by UCC Article 2, the court applied the UCC Article 1 choice of law rule (then at section 1-105 , now at section 1-301 in revised Article 1), to determine that Texas law applied (and the contract was not usurious).
While the Article 1 choice of law rule relied on in Evans is consistent with other applicable choice of law principles, and the case can be considered properly decided on that basis, the court was not correct to the extent that it directly applied the Article 1 choice of law rule to determine the law governing usury. Nonetheless, the court's choice of law analysis was sound under prevailing legal principles. See generally Alvin C. Harrell, Case Note: Evans v. Harry Robinson Pontiac-Buick and UCC Choice of Law in Consumer Sales Transactions. 53 Consumer Fin. L. Q. Rep. 198 (1999). Such cases illustrate the extent to which the UCC is recognized as a general law of commerce, even beyond the boundaries of its scope.
Two other recent cases also provide good arguments that a contractual choice of law provision made pursuant to the Article 1 choice of law rule (now at section 1-301 ) is applicable to a plaintiff's non-UCC claims (in these cases, tort claims) arising out of a UCC transaction. The first is El Pollo Loco, S.A. de C.V. v. El Pollo Loco, Inc. 344 F. Supp. 2d 986 (S.D. Tex. 2004). The court held that under Texas choice of law principles, a provision in an intellectual property license, between a Mexican licensor and United States licensee, which designated Mexican law as governing "all disputes which may arise in connection with the performance of this Agreement," was sufficiently broad to allow application of Mexican law in tort claims, as well as contract disputes. The court reasoned that:
the choice of law clause plainly governs Plaintiff's contract claims, but it is not equally clear whether it also applies to Plaintiff's tort claims. The Fifth Circuit has narrowly construed choice of law clauses so as only to apply to contract claims, and not tort claims arising out of the contractual dispute; however, the choice of law clauses that have been narrowly construed have also been more narrowly written than the clause at issue here. See, e.g., Benchmark Elecs., Inc. V. J.M. Huber Corp., 343 F.3d 719, 727 (5th Cir. 2003); Caton v. Leach Corp., 896 F.2d 939, 942-43 (5th Cir. 1990).
In Benchmark, where the choice of law clause stated that the "Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York," the court held that it would construe the agreement under New York law, but that Benchmark's tort claims were not governed by the narrow choice of law provision.
Benchmark, 343 F.3d at 726. Likewise, in Caton, the choice of law clause said that the "Agreement shall be construed under the laws of the State of California," and the court held that this narrow clause did not apply to Caton's tort claim. Caton, 896 F.2d at 942-43. Plaintiff argues that the choice of law clause in this case, which states that Mexican law governs "[a]ll disputes which may arise in connection with the performance of this Agreement which cannot be resolved by means of negotiation," should also be narrowly interpreted so as not to apply to Plaintiff's tort claims.
Defendant cites Valero Energy Corp. v. Wagner & Brown II, 777 S.W.2d 564 (Tex.App.-El Paso 1989, writ denied), to support its argument that the choice of law clause in this case should be interpreted to apply to Plaintiff's tort claims because the claims are intertwined with the Agreement and therefore "arise in connection with the performance of th[e] Agreement." In Valero, the parties entered into a contract that had an arbitration clause, which stated that the parties agreed to submit all disputes to arbitration "in the case of any disagreement arising under this Contract." Valero, 777 S.W.2d at 565. The court held that "when the parties have agreed to arbitrate any dispute or disagreement 'arising under the contract,' all disputes of whatever nature, including those sounding in tort, that are directly and closely related to the performance of the contract ... are subject to arbitration." Id. At 567. Defendant argues that the same reasoning should apply to the interpretation of the choice of law clause here because its broad wording is similar to the arbitration clause in Valero; therefore, since Plaintiff's tort claims are directly and closely related to the performance of the contract, they are covered by the choice of law clause. The Court recognizes that the phrase "[a]ll disputes which may arise in connection with the performance of this Agreement" is broader than the choice of law clauses at issue in Benchmark and Caton, which only govern how the respective agreements "shall be construed," and more closely resembles the phraseology of the arbitration clause in Valero. Given the wording of the choice of law clause in the Agreement, the Court finds that the choice of law clause applies to Plaintiff's tort claims, as well as its contract claims, because the tort claims are disputes that are connected "with the performance of th[e] Agreement." Therefore, Mexican law applies to all of Plaintiff's claims.
The other recent case suggesting that the Article 1 choice of law provision should apply to non-UCC issues that arise in UCC transactions is M. Block & Sons, Inc. v. IBM Corp., 2004 WL 1557631 (N.D. Ill. 2004). The court in relevant part stated:
A two part analysis applies to determine, "the breadth of a contractual choice-of-law provision." Birnberg v. Milk St. Residential Assoc. Ltd. P'ship., Nos. 02 C 0978, 02 C 3436, 2003 WL 151929 at *13 (N.D.Ill. Jan.21, 2003); see also Medline Indus., Inc. v. Maersk Medical Ltd., 230 F.Supp.2d 857, 863 (N.D.I11.2002); Precision Screen Mach., Inc. v. Elexon, Inc., No. 95 C 1730, 1996 WL 495564 at *2-3 (N.D.11l. Aug.26, 1996). The first part of the analysis "examine[s] the language of the contract's choice-of-law clause to determine if the parties 'intended [it] to govern all claims between them."' Birnberg, 2003 WL 151929 at *13 (quoting Medline Indus. Inc., 230 F.Supp.2d at 863). The second part of the analysis focuses on whether a tort claim depends on the contract. Id. at 14. Even if intent is not present, tort claims that are dependent on a contract are "subject to [the] contract's choice-of-law clause regardless of the breadth of the clause." Medline Indus. Inc., 230 F.Supp.2d at 862. To determine if a tort claim depends on a contract, courts examine whether: (1) "the [claim] alleges a wrong based upon interpretation and construction of the contract," Birnberg, 2003 WL 151929 at * 14 (quoting Medline Indus., Inc., 230 F.Supp.2d at 862); (2) "the 'tort claims are closely related to the parties' contractual relationship," Birnberg, 2003 WL 151929 at * 14 (quoting Miyano Mach. USA, Inc. v. Zonar, No. 92 C 2385, 1994 WL 233649 at *2 (N.D.Ill. May 23, 1994)); and (3) "the tort claim 'could exist without' the contractual agreement which contains the choice-of-law provision." Birnberg, 2003 WL 151929 at * 14 (quoting Precision Screen Mach. Inc., 1996 WL 495564, *2-3.
The language of the choice of law clause in the IBM Contract shows that the parties intended for New York law to apply to not only contractual claims, but also other claims related to the contract. The clause states that the laws of New York will govern any "rights, duties, and obligations arising from, or relating in any manner to, the subject matter of this Agreement." This provision indicates that the parties intended New York law to apply broadly to matters related to or arising out of the contractual obligations. The term "arising out of" in forum selection clauses includes all disputes which "arguably depend on the construction of an agreement." Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 603 (7th Cir.1994). The choice of law clause will thus be interpreted to apply broadly to disputes between the parties related to the IBM Contract. Applying the second part of the two-part test from Birnberg, Plaintiffs claims of fraudulent misrepresentation, fraudulent concealment, and violation of the ICFA all allege a wrong based on construction, or formation, of the contract. The claims also are closely related to the contractual relationship. Further, Plaintiff does not claim that New York law is, "dangerous, inconvenient, immoral, or contrary to public policy." Accordingly, New York law applies to the claims of fraudulent misrepresentation, fraudulent concealment, and the alleged violations of the ICFA.
Thus, although section 1-102 limits the scope of Article 1 to UCC-related issues and transactions, the UCC is widely recognized as the primary national law of commerce and, particularly where there is a contractual provision that constitutes evidence of the parties' intent under UCC Article 1, courts are likely to view the UCC as articulating broadly-applicable standards with relevance beyond the stated boundaries of the Article 1.