Siegelman v. Cunard White Star Ltd.

Brief Fact Summary

Mrs. Siegelman (Plaintiff) was crossing the Atlantic Ocean aboard a Cunard (Defendant) ship when she was injured.  Her ticket contained a clause that required suits for injury to be brought within one year and that all disputes arising out of the contract would be decided by reference to English law.

Synopsis of Rule of Law

The parties to a contract may stipulate in the contract which law will govern disputes regarding interpretation or validity of the contract so long as the choice is genuine and relates to either the execution or performance of the contract.

Facts

Mrs. Siegelman (Plaintiff) and her husband purchased an Atlantic crossing ticket from Cunard Lines (Defendant) in New York.  The ticket, which was in the form of a contract, contained three clauses relevant to this case.  One was that any action for death or injury to a passenger must be filed within one year from the date of the accident.  The second stated that all questions arising on the contract would be decided according to English law.  The third clause stated that any alterations of the contract terms of Cunard (Defendant) liability must be in writing.  Mrs. Siegelman (Plaintiff) was injured while on the high seas and filed a claim for reimbursement.  The one-year deadline approached before settlement of the claim and a claims agent from Cunard (Defendant) stated, when asked, that suit would not have to be filed since there was an excellent chance of settlement.  Mrs. Siegelman (Plaintiff) subsequently died and Defendant then denied any recovery on the basis that Plaintiff’s claim did not survive her.  Mr. Siegelman (Plaintiff) then filed suit past the one-year time limit, asserting waiver of the limit by the claims agent.  Citing the terms of the contract, the district court dismissed the suit on motion by Defendant.

Issue

Where the parties to a contract stipulate in the contract which law will govern disputes regarding interpretation or validity of the contract, will that stipulation, so long as the choice is genuine and relates to either the execution or performance of the contract, be given effect by the court?

Held

(Harlan, J.)  Yes.  Where the parties to a multistate or international contract stipulate in the contract which law will govern disputes regarding interpretation or validity of the contract, that stipulation, so long as the choice is genuine and relates to either the execution or performance of the contract, will be given effect by the court.  Since the case involves maritime jurisdiction, it will be decided in the context of federal law rather than state law.  This case presents issues on contract, not tort.  The intent of the parties, as evidenced by the contract, is that English law should control.  This intent will be given force where applicable.  The parties may always stipulate which law will control interpretation, since this will involve no more than a stipulation of definitions.  However, the stipulation as to validity is an attempt to usurp the proper legislative authority of a state to determine validity.  It will be recognized only insofar as it does not conflict with that valid authority.  The choice of law that is stipulated must bear a reasonable relationship to either the place of the making or of performance of the contract.  Therefore, the selection of the applicable law as to validity will not automatically be validated but can be recognized by the court in its discretion.  The question regarding the claim agent’s purported waiver is more closely related to validity than to interpretation.  Therefore, it should be considered under applicable English law which we read as holding such verbal waiver ineffective.  Therefore, the trial court’s dismissal of the suit was proper.  Affirmed.

Dissent

(Frank, J.)  The contract clause referred to suits brought on the contract.  This suit arose from post contract behavior and should not be governed by the terms of the contract.  Even if it were governable by the contract, the reference to English law is ambiguous enough regarding its application that it should be disregarded.  Plus, this is a contract of adhesion since it was offered on a take it or leave it basis by a party in a superior bargaining position.  This issue of waiver should have been determined in accordance with internal American law.

Discussion

Contracts with choice of law stipulations will usually be given effect unless it is clearly unreasonable to do so.  The rationale usually promoted is intent of the parties and minimizing litigation.  The Uniform Commercial Code specifically sanctions choice of laws provisions in contracts so long as the law chosen bears a reasonable relationship to the parties and/or the contract.  With this country’s wide adoption of the U.C.C., the number of cases relating to effectiveness of such contract clauses decreased abruptly.  The Second Restatement also adopts the position validating reasonable choice of law preselections.  The proviso is always present, however, that the choice must relate in some reasonable way to the parties or the contract.  The adhesion contract theory expressed in the above dissent has been used to invalidate choice of law clauses where the weaker party to a contract is disadvantaged greatly by the clause.