First legal issue in this case is the ‘choice of law clauses’. BP and PetroEcuador dispute whether the domestic law of Ecuador or the CISG applies. Before, BP’s appeal, The District Court of Texas decided to govern Ecuador law, because PetroEcuador filed a notice of intent to apply foreign law. This is important because if law of Ecuador applies, the CFR term may not have a meaning (and yes, according to Ecuador Commercial Code the seller is required to deliver conforming goods at the agreed destination) ‘Choice of law’ clauses are contract provisions that stipulate jurisdiction whose law will apply to the contract and its terms. As a general rule of the U.S. law, the choice of law selection will be upheld as long as there is a reasonable relationship (nexus) between the transaction and the jurisdiction chosen. And also, Texas law enforces unambiguous choice of law provisions, and this is truly clear with the clause stating “Jurisdiction: Laws of the Republic of Ecuador.”
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