The United States has a federal system of government. What this means is that under the US Constitution there is a national, or federal, government, and there are individual states, each enjoying a substantial degree of autonomy. Each state has its own constitution, its own government, its own set of statutory laws made by its own legislature, and, because of the common law tradition, a body of case law created by its own courts.
The US Constitution gives certain law-making powers to the federal government, others to the state government, and yet others to both.
The law-making powers granted to the United States Congress are specific and limited. They include areas of interstate and foreign commerce, federal taxation, currency, the postal service, declaration of war, maritime law, bankruptcy, patent and copyright, and the establishment of armed forces. In addition, Congress is also empowered to make all laws which should be necessary and proper for carrying into execution the foregoing powers. Among these enumerated and implied powers, some are exclusive and others are shared with the states. In areas where there are both federal and state laws, federal law prevails if the two are in conflict.
The powers not specifically granted to Congress are reserved to the states or to the people. Thus, most areas of private law, such as contracts, torts, business and corporate governance, are governed by the statutes and common law of each state.
Beginning in the mid-20th century, a number of trends combined to enhance the federal role within the legal system. While no state may deny a citizen any right guaranteed by the federal Constitution, many interpret their own constitutions as bestowing even more generous rights and privileges. State courts applying state law continue to decide most contractual disputes. The same is true of most criminal cases, and of civil tort actions. Family law, including such matters as marriage and divorce, is almost exclusively a state matter. For most Americans most of the time, the legal system means the police officers and courts of their own state, or the various municipalities and other political subdivisions within that state.
As a consequence of this federal scheme, choice of law questions confront judges and lawyers in multi-jurisdiction disputes almost as frequently as in international litigation. If a dispute arises out of a series of activities in different states or between parities who are residents of different states, and the substantive rights at issue are defined differently in these states, the choice of applicable law may become a crucial and hotly contested issue, thus giving an added dimension of complexity to the legal situation.
Let’s first look at a case involving claims of securities fraud. Since securities transactions are governed by both federal and state laws, the applicable law in such cases includes both federal law and the laws of relevant states.
A tort claim typically does not involve federal law. The law applicable to a tort claim is generally said to be the law. The law applicable to a tort claim is generally said to be the law of the place of injury. Thus, a court sitting in state X would follow its own rules of procedure, but it would use the tort law of state Y if the injury occurred in Y.
The choice of law question with respect to contract disputes is much more complicated. Several choice of law rules are used by different courts on issues involving the law of contracts. Suppose a contract. Suppose a contract is concluded in one state(State A), performed in another(State B), and the parties are from still others(State C and State D). In this multi -jurisdiction case, which state’s substantive law is applicable? The question will be answered by the court which hears the case. Suppose the plaintiff brings his contract claim before a court in his home state C. Suppose also that according to the choice of law rules of State C, contract disputes should be governed by the law at the place of contract performance. The court in State C will apply the contract law(both statutory and case law) of state B in resolving the dispute. However, if the plaintiff brings the dispute before a court sitting in defendant’s home state D, whose choice of law rules direct the court to apply the law of the state most involved with the contract, the outcome of the lawsuit may be different.
The trend toward uniform statutes has tended to decrease these conflicts, but many of them still exist. So, in studying American law, students should be aware that different states may have different substantive laws and different choice of law rules regarding a particular legal situation, resulting in the possibility that the choice of forum may affect the substantive rights of parties concerned.