1. What was the court’s holding with respect to the enforceability of the choice of law clause? 

2. What factors did the court use in its decision to uphold the choice of law provision? 

Juliette Shulof Furs (JSF) is a New York corporation that has been in the fur-dealing business for fifteen years. George Shulof, an officer of JSF, attended two auctions conducted by Finnish Fur Sales (FFS) in Finland in 1987. He purchased more than $1.2 million worth of skins at the auctions. Shul of attended each auction and was the actual bidder. The conditions of sale were listed in the auction catalog in English. JSF paid for the majority of the skins purchased, leaving an unpaid balance of $202,416.85. FFS brought this action to recover the contract price of the skins from Shulof, claiming he was personally liable for payment under Finnish law. Shul of responded that he was acting only as the agent for JSF and that under New York law he was not personally responsible for the contracts of the corporation he represented at the auction. 

Section 4 of the Conditions of Sale provides: Any person bidding at the auction shall stand surety as for his own debt until full payment is made for purchased merchandise. If he has made the bid on behalf of another person, he is jointly and severally liable with the person for the purchase. George Shulof denies any personal liability on the grounds that the provision is unenforceable under both New York and Finnish law. 

Section 15 of the Conditions of Sale provides that “[t] hese conditions are governed by Finnish law.” Choice of law clauses are routinely enforced by the courts of this Circuit, “if there is a reasonable basis for the choice.” Morgan Guaranty Trust Co. v. Republic of Palau, 693 F. Supp. 1479, 1494 (S.D.N.Y. 1988). New York courts also generally defer to choice of law clauses if the state or country whose law is thus selected has sufficient contacts with the transaction. Under those circumstances, “New York law requires the court to honor the parties’ choice insofar as matters of substance are concerned, so long as fundamental policies of New York law are not thereby violated.” Woodling v. Garrett Corp., 813 F.2d 543,551 (2d Cir. 1987). Finland’s contacts with the transactions at issue are substantial, rendering the choice of law clause enforceable unless a strong public policy of New York is impaired by the application of Finnish law. Plaintiff FFS is a Finnish resident, which held auctions of Finnish-bred furs in Finland. All bids were made in Finnish marks, with payment and delivery to take place in Finland. Mr. Shulof voluntarily traveled to Finland in order to partake in FFS’s auctions. Thus, virtually all of the significant events related to these transactions took place in Finland. Finland also has an obvious interest in applying its law to events taking place within its borders relating to an important local industry, and in applying uniform law to numerous transactions with bidders from foreign countries. 

bidders from foreign countries. Mr. Shulof argues that the choice of Finnish law provision should be held invalid … According to Mr. Shulof, New York has the following interests in this action: it is the place of business and of incorporation of JSF; FFS has a representative with a New York office who communicated with Mr. Shulof about the fur auctions; and that New York is, allegedly, “the economic and design center for the world’s fur industry.” Mr. Shulof also argues that, under New York law. Section 4 of the Conditions of Sale would be invalid as contravening New York’s policy against imposing personal liability on corporate officers … Under Federal Rule of Civil Procedure 44.1, a court, “in determining foreign law, may consider any relevant material or source, including testimony.” Both parties have submitted affidavits of Finnish attorneys on the issue of Mr. Shulof’s liability under Finnish law. FFS’s expert, Vesa Majamaa, a Doctor of Law and Professor of the Faculty of Law at the University of Helsinki, gives as his opinion that the provision of Section 4 of the Conditions of Sale imposing personal liability upon the bidder, regardless of whether he bids on behalf of another, is valid both as a term of the particular auctions at issue and as a general principle of Finnish and Scandinavian auction law. According to Majamaa, it is “commonly accepted in Scandinavia that a bidder, by making a bid, accepts those conditions which have been announced at the auction.” Further, he states: According to the Finnish judicial system, no one may use ignorance of the law as a defense … This same principle is also … applicable when the matter in question concerns … terms of trade … If the buyer is not familiar with the terms observed in an auction, he is obliged to familiarize himself with them. In this respect, failure to inquire will result in a loss for the buyer … If a businessman who has been and is still active in the fields falls back on his ignorance in a case in which he has been offered an actual opportunity to find out about the terms of the auction, his conduct could be considered to be contrary to equitable business practices [and] the “Principle of Good Faith.” … 

Majamaa also notes that under Danish law, which he maintains would be applied by a Finnish court in the absence of Finnish decisional or legislative law on point, “It is taken for granted that someone who has bid on merchandise on someone else’s account is responsible for the transaction, as he would be for his own obligation, together with his superior … Hence the auction buyer’s responsibility is not secondary, as is, for example, the responsibility of a guarantor.” … 

Majamaa also opines that the terms of Section 4 are neither unexpected nor harsh because “the liability has been clearly presented in the terms of the auction,’ and because the same rule of liability would apply under Finnish law in the absence of any provision. …[T]he Court concludes that a Finnish court would enforce the provisions of Section 4 and impose personal responsibility upon George Shulof for his auction bids on behalf of JSF. Moreover, even if a New York court would not enforce such a provision in a transaction to which New York law clearly applied, this Court does not find New York’s interest in protecting one of its residents against personal liability as a corporate officer to constitute so fundamental a policy that New York courts would refuse to enforce a contrary rule of foreign law. Indeed, the New York Court of Appeals has held that “foreign-based rights should be enforced unless the judicial enforcement of such a contract would be the approval of a transaction which is inherently vicious, wicked or immoral, and shocking to the prevailing moral sense.” Intercontinental Hotels Corp. v. Golden, 15 N.Y.2d. 9, 13, 254 N.Y.S.2d 527, 529, 203 N.E.2d 210 (1964). Given the lack of a clear conflict with either New York law or policy, this Court concludes that a New York court would apply Finnish law to the issue before the Court. The Court also notes that a similar result has often been reached under New York conflict rules even in the absence of a contractual choice of law clause. Thus, Mr. Shulof must be held jointly and severally liable with JSF for any damages owed to FFS for the furs purchased. 

Decision. Under the conflict of law rules, the U.S. court applied Finnish law to hold Shulof personally liable for the contract debt.