Well-drafted restrictive covenants include “choice-of-law” provisions that define which state’s law will be used to interpret the agreement and forum selection provisions that specify where the parties will litigate breaches of the contract.
In 1993, the Delaware General Assembly enacted 6 Del. C. § 2708 which authorizes the parties to a contract that involves $100,000.00 or more to include a Delaware choice-of-law provision in their contracts, and states that the inclusion of such written provisions in an agreement “shall conclusively be presumed to be a significant, material and reasonable relationship with this State and shall be enforced whether or not there are other relationships with this State.”
In the synopsis of the Bill passing this law, the General Assembly noted that the statute “is designed to give maximum effect to the principle of freedom of contract and the enforceability of such provisions in contracts previously made and to be made, and to provide the parties to such agreements with the certainty that courts sitting in Delaware will enforce such choice of law provisions. The Bill is intended to supersede all Delaware common law limitation on the enforceability of Delaware choice of law provisions (including any restrictions contained in the Restatement (Second) Conflict of laws), as well as limitations on contractual consent to jurisdiction or service of process.”
The Court of Chancery has cited this statute repeatedly as support for the proposition that choosing Delaware law amounts to a substantial relationship with Delaware, even in cases where the parties have no operations or sales in the state.