ORDER RE: DEFENDANTS’ MOTION TO DISMISS PUNITIVE DAMAGES CLAIMS
*1402 TABLE OF CONTENTS
I. INTRODUCTION AND FACTUAL BACKGROUND.Í402
II. LEGAL ANALYSIS.1403
A. Conflict of Laws.1403
1. Characterization Of The Causes Of Action.1404
2. A True Conflict Of Laws.1404
B. Iowa’s Conflict-of-laws Rules.1405
1. The Iowa Conflict-of-laws Rules For Tort Cases.1405
а. Iowa’s substantive-procedural or right-remedy dichotomy.1405
b. Content of the test in a tort case.1409
2. The Iowa Conflict-of-laws Rules For Contract Cases.1410
a. Choice or absence of choice of law in the contract.1410
b. Consideration of factors for choice of law as to contract claims_1412
III. CONCLUSION.1413
This litigation was brought by a Nebraska livestock producer against the South Dakota maker of a livestock vaccine which is produced in the maker’s Iowa plant. The livestock producer alleges that the vaccine caused illnesses and deaths among over two thousand head of cattle treated with it. The matter is presently before the court on defendants’ motion to dismiss punitive damages claims on the ground that Nebraska law is applicable and does not allow such claims, whereas Iowa law allows punitive damages. The court must resolve the conflict-of-laws question of what state’s substantive law applies to this controversy. The court must also determine whether punitive damages involve substantivе law, and are therefore governed by the law of the state selected by application of Iowa’s conflict-of-laws rules, or a question of procedural law, which is governed by the law of the forum.
I. INTRODUCTION AND FACTUAL BACKGROUND
Plaintiff Harlan Feeders, Inc., a Nebraska corporation with its principal place of business in Harlan County, Nebraska, filed its complaint in this matter on November 10, 1993. Harlan Feeders is engaged in the business of feeding calves on its premises to finish weight and condition, and selling them for profit on the cattle slaughter market. Some of the cattle involved in this lawsuit are alleged to have belonged to others and to have been placed with Harlan Feeders for feeding to finish weight and subsequent sale. The owners of these cattle have assigned to Harlan Feeders their rights to pursue on their behalf their claims against defendants in this lawsuit. Defendants are Grand Laboratories, Inc., a South Dakota corporation that does business in Iowa and Nebraska, and has a production facility in Lyons County, Iowa, where it produced the product at the center of this litigation, and Duane Pan-kratz, sued both individually and as trustee of the Duane Pankratz Trust, which is alleged to be the owner of a majority of the stock in Grand Labs (collectively herein “Grand Labs”).
The gravamen of the complaint, which is in six counts, is that Grand Labs manufactured and sold Harlan Feeders a defective cattle vaccine, called “Vira Shield,” which caused illnesses and deaths among over two thousand cattle to which Harlan Feeders administered it. The complaint alleges causes of action that sound in tort, including negligence and strict products liability, as well as contract or quasi-contract causes of action including misrepresentation or breach оf warranty. 1 The complaint seeks actual and punitive damages.
*1403 On April 28, 1994, defendants moved to dismiss Harlan Feeders’ punitive damages claims on the ground that Nebraska law applies in this diversity action, because Nebraska is the state with the most significant relationship to the causes of action presented, and Nebraska law does not provide for punitive damages. Harlan Feeders resisted the motion on May 2, 1994, contending, first, that Iowa substantive law should apply, because Iowa bears the most significant relationship to the causes of action presented, but also arguing that even if Nebraska substantive law applies, the law of Iowa applies to procedures and remedies, including punitive damages. On June 23, 1994, shortly before a hearing on Grand Labs’ motion before the Hon. Donald E. O’Brien, now Senior Judge of this District, Grand Labs filed a reply brief asserting that Harlan Feeders has misread Iowa cases, which do not consider punitivе damages to be remedial or procedural, but instead apply the most significant relationship test to determine the law applicable to punitive damages questions. Judge O’Brien reserved ruling on the motion following a hearing on July 1, 1994.
The submissions of the parties indicate that they are in general agreement as to the following facts concerning the contacts of the parties with each other and with the states of Nebraska, Iowa, and South Dakota. The citizenship and places of business of the parties were discussed above. Harlan Feeders’ complaint indicates that it purchased and used the “Vira Shield” vaccine in Nebraska, and that its livestock were injured in Nebraska. Grand Labs asserts further that all communications between the parties took place in Nebraska, and no business has been transacted between the parties outside of Nebraska. Grand Labs therefore argues that all of the events leading to the complaint occurred in Nebraska, so Nebraska substantive law should apply. Harlan Feeders disputes only the fact that all communications took place in Nebraska: Harlan Feeders argues that some of the representations underlying its misrepresentation or breach of warranty claims were made by written statements and audiovisual materials prepared, published, assembled, and/or produced by Grand Labs in either South Dakota or Iowa. Harlan Feeders also stresses that the vaccine was manufactured by Grand Labs at its facility in Iowa, a point Grand Labs does not dispute. Harlan Feeders asserts that the place of injury, Nebraska, is only “fortuitous” or “happenstance” and therefore should have little impact upon the court’s conflict-of-laws analysis.
At the request of the parties, this matter lay dormant for several months while other litigation involving Grand Labs worked its way through the Eighth Circuit Court of Appeals. The parties hoped that, the other litigation might resolve some of the questions concerning discovery of financial information from Grand Labs and concerning punitive damages. That other litigation has now concluded. In the interim, this matter was reassigned to me. 2
By order dated December 20, 1994, the court ordered the parties to file reports on the status of the motion to dismiss punitive damages, whether the parties were seeking or had reached a stipulation that would solve the discovery problems as to punitive damages, and whether they wished to supplement their prior filings in support of or resistance to the motion to dismiss punitive damages in light of the resolution of the other litigation. Both parties, rather belatеdly, responded to the court’s order by fifing their reports, Grand Labs on January 23,1995, and Harlan Feeders on January 25, 1995. Both parties state that the resolution of the other litigation involving Grand Labs has had no effect upon the present litigation, and both parties stated their desire to stand by their previous briefs on the issue of dismissal of the punitive damages claim. With this background, the court turns to disposition of the motion to dismiss punitive damages.
II. LEGAL ANALYSIS
A. Conñict of Laws
To resolve the issue of which state’s law applies to Harlan Feeders’ claim for
*1404
punitive damages, the court looks to the conflict-of-laws or choice-of-law rules of the state of Iowa, because in an action based upon diversity of citizenship jurisdiction, a federal district court must apply the substantive law of the state in which it sits, including its conflict-of-laws or choice-of-law rules.
Klaxon Co. v. Stentor Elec. Mfg. Co.,
1. Characterization Of The Causes Of Action
The first step in determining any choice-of-law question is to determine the proper characterization of what kind of case is involved, and the law of the forum controls this question as well.
Drinkall,
2. A True Conflict Of Laws
Before any choice of law need be made, there must be a “true conflict” between the laws of the possible jurisdictions on the pertinent issue.
See Nesladek v. Ford Motor Co.,
Punitive or exemplary damages are prohibited by the Constitution of the State of Nebraska. Nebraska Const. Art. VII, § 5;
Braesch v. Union Ins. Co.,
B. Iowa’s Conflict-of-laws Rules
Iowa applies the “most significant relationship test” to conflict-of-laws or choice-of-law questions involving either contract or tort claims.
See Christie v. Rolscreen Co.,
1. In a trial of a claim involving the request for punitive or exemplary damages, the court shall instruct the jury to answer special interrogatories or, if there is no jury, shall make findings, indicating all of the following:
a. Whether, by a preponderance of clear, convincing, and satisfactory evidence, the conduct of the defendant from which the claim arose constituted willful and wanton disregard for the rights or safety of another.
******
2. An award for punitive or exemplary damages shall not be made unless the answer or finding pursuant to subsection 1, paragraph “a ", is affirmative....
1. The Iowa Conflict-of-laws Rules For Tort Cases
a. Iowa’s substantive-procedural or right-remedy dichotomy
Before examining the content of the “most significant relationship” test in the context of a tort cause of action, the court must first determine to what the law chosen using Iowa’s conflict-of-laws rules will apply. The Iowa Supreme Court hаs stated that
the local law of the state having the most significant relationship with the occurrence and with the parties controls their rights, obligations and liabilities in tort.
Zeman,
procedural matters and matters pertaining to the remedy to be applied must be determined by the law of the forum. Kingery v. Donnell,222 Iowa 241 ,268 N.W. 617 (1936); Dorr Cattle Co. v. Des Moines Nat. Bank,127 Iowa 153 ,98 N.W. 918 (1904).
Brooks v. Engel,
*1406
In
Cameron,
the Iowa Supreme Court did not reject this “procedural-substantive or right-remedy” distinction.
Cameron,
[W]e reject plaintiffs presumption that Nebraska law will apply to issues of liability and damages [apparently on the basis that Nebraska was the place of impact]. Iowa has adopted the “modern” choice of law rules, formulated in accordance with the Restatement (Second) of Conflicts section 145(1):
The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties....
Numerous decisions of this court have recognized and applied this issue-oriented “most significant relationship” doctrine. Goetz v. Wells Ford Mercury, Inc.,405 N.W.2d 842 , 843 (Iowa 1987); Zeman v. Canton State Bank,211 N.W.2d 346 , 348-49 (Iowa 1973); Fabricius v. Horgen,257 Iowa 268 ,132 N.W.2d 410 (1965).
Cameron,
Iowa courts have recognized that certain issues are “procedural,” hence governed by the law of the forum.
Cameron,
The court has found little in the decisions of Iowa courts that provides much guidance as to what distinguishes “substantive” or “rights” issues from “remedies” or “procedural” issues beyond the cases cited immediately above. However, the Eighth Circuit Court of Appeals recently examined this question as it pertained to Minnesota’s conflict-of-laws rules, which also make a substantive/procedural distinction.
Nesladek,
[i]n Minnesota, “ ‘[i]t has long been recognized that substantive law is that part of law which creates, defines, and regulates rights, as opposed to “adjective or remedial” law, which prescribes method [sic] of enforcing the rights or obtaining redress for their invasion.’ ” Zaretsky v. Molecular Biosystems, Inc.,464 N.W.2d 546 , 548 (Minn.Ct.App.1990) (quoting Meagher v. Kavli,251 Minn. 477 ,88 N.W.2d 871 , 879-80 (1958)).
Id. The court therefore found it an easy matter to classify Nebraska’s statute of repose and Minnesota’s useful life statutes as substantive, even though statutes of limitations are generally considered procedural. Id. The court reasoned as follows:
A statute of repose ... directly impacts on the accrual of a cause of action in the first instance. It operates as a statutory bar independent of the actions (or inactions) of the litigants — often before those litigants can even be identified. See Zaretsky,464 N.W.2d at 550 (finding prejudgment interest statute procedural because, inter alia, it “applies to the relationship of the parties as litigants”). Although the Nebraska statute of repose does not create rights, it *1407 is no less substantive because it imposes a disability upon potential claimants. Or, viewed another way, it creates in the potential products-liability defendant a right to immunity from suit under the circumstances set out in the statute. See Norwest Bank Neb., N.A. v. W.R. Grace & Co.-Conn.,960 F.2d 754 , 759 (8th Cir.1992) (interpreting Nebraska law). The statute of repose “regulates rights,” not remedies. It does not dictate a “method of enfоrcing the rights or obtaining redress for their invasion.” Zaretsky,464 N.W.2d at 548 (quoting Meagher,88 N.W.2d at 880 ). Rather, its effect is that ten years after a product first is sold there can be no rights to enforce, regardless of any subsequent injury related to the product’s use. Cf. Stern v. Dill,442 N.W.2d 322 , 324 (Minn. 1989) (finding a Minnesota statute to be procedural for purposes of extending filing deadlines because “it does not change [plaintiffs] basic right to sue for negligence”). By the same token, Minnesota’s useful life statute regulates the rights of a defendant in a products liability suit, that is, it creates the right to present a substantive defense — the useful life defense— to such a suit. “Expiration of useful life is a defense” and “a factor to be weighed by the jury in determining the fault of the manufacturer and the fault of the user.” Hodder [v. Goodyear Tire & Rubber Co.], 426 N.W.2d [826] at 832 [ (Minn.1988) ]. It is no more a procedural bar — a statute of limitations type of defense — than is the Nebraska statue of repose.
Id. at 736-37 (footnotes omitted).
Harlan Feeders, seeking application оf Iowa law, which provides for punitive damages, argues that punitive damages are “remedies,” and thus will be governed by Iowa law even if Nebraska substantive law is applicable. Harlan Feeders relies heavily on
Fabricius v. Horgen,
First,
Brooks
does not even address the question of what damages are available, assuming that “damages” and “remedies” are equivalent, which the court does not admit to be the case. Instead,
Brooks
considered the very narrow question of whether admissibility of evidence was a procedurаl matter governed by the law of the forum, concluding that forum law applied to the question.
Brooks,
Second, in
Cameron,
the Iowa Supreme Court stated that “Iowa has adopted the “modern” choice of law rules, formulated in accordance with the Restatement (Second) of Conflicts section 145(1).”
Id.; see also Baedke v. John Morrell & Co.,
§ 171. Damages
The law selected by application of the rulе of § 145 determines the measure of damages.
The comments to this section of the Restatement include one precisely on point:
d. Exemplary damages. The law selected by application of the rule of § 145 determines the right to exemplary damages.
Restatement (Second) of Conflict of Laws, § 171, comment d.
Accord Enron Corp. v. Lawyers Title Ins. Corp.,
Third, application of the substantive/procedural distinction, as described by the Eighth Circuit Court of Appeals in
Nesladek,
Harlan Feeders nonetheless cites two cases as demonstrating that courts apply the law of the forum to the question of punitive damages.
See In re Air Crash Disaster at Sioux City, Iowa, on July 19, 1989,
In fact, the court has found no authority that runs contrary to the proposition that punitive damages are a matter of substantive law, and the applicable law must be determined by application of the most significant relationship test.
See, e.g., Johnson v. Occidental Fire & Cas. of North Carolina,
b. Content of the test in a tort case
The court turns next to the question of what factors should be considered in analyzing which forum, Iowa or Nebraska, has the most significant relationship to the tort claims in this case. The Iowa Supreme Court has stated that
[cjonsiderations include: place of injury, place of conduct leading to the injury, domicile of the parties, and the place where any relationship between the parties is centered.
Zeman,
However, among these factors, the “place of impact” has little importance where the state that is the place of impact has no other interest in the case.
Cameron,
[i]n a series of cases culminating in Fuerste v. Bemis,156 N.W.2d 831 (Iowa 1968), and Berghammer v. Smith,185 N.W.2d 226 (Iowa 1971), we rejected the lex loci delicti doctrine and supplanted it with the most significant relationship test.
Id. at 349.
Harlan Feeders argues that the place of any injury resulting from production of a defective product is only “happenstance” or “fortuitous,” and therefore emphasizes production of the product in Iowa, Iowa’s benefits from Grand Labs’ economic activity, and Iowa’s long-standing policy interest in deterring undesirable conduct occurring within this state by imposing punitive damages in appropriate circumstances. Furthermore, Harlan Feeders argues, Grand Labs could reasonably expect to be subjected to the burdens and benefits of Iowa law, because it has its principal place of business in Iowa.
Notwithstanding these arguments, however, in the present case, the court concludes that Nebraska substantive law applies. For the limited weight the factor now receives, the place of injury was Nebraska. Nebraska was also the principal place of conduct leading to the injury, because it was there that *1410 the parties negotiated purchase of the vaccine, where Harlan Feeders received all of the information сoncerning the vaccine, and where in fact Harlan Feeders administered it to its livestock. Harlan Feeders, the plaintiff, is domiciled in Nebraska, and Grand Labs admittedly does business there, but Harlan Feeders has no domiciliary contact with Iowa. The court also concludes that Nebraska is where the relationship between the parties is centered. For these reasons, the substantive law of Nebraska applies to this case, including its law prohibiting punitive damages.
This conclusion is not eroded by consideration of the policy and interests of the states from which the substantive law might be chosen. Nebraska has made a policy choice that punitive damages are inappropriate, and that interest is not outweighed by Iowa’s contrary interest in imposing punitive damages as a deterrent, at least not in circumstances where the plaintiff is a resident of Nebraska, not Iowa, where the alleged injured occurred in Nebraska, not Iowa, as the result of use of a product produced by a South Dakota, not an Iowa, corporation, even when the corporation physically produced the product in Iowa.
See Enron Corp. v. Lawyers Title Ins. Corp.,
Grand Labs’ motion to dismiss the punitive damages claim should be granted as to Harlan Feeders’ claims sounding in tоrt, because Nebraska substantive law applies to those claims under Iowa’s choice-of-law or conflict-of-laws rules. The court will next consider whether Nebraska law should also apply to any of Harlan Feeders’ claims sounding in contract.
3. The Iowa Conflict-of-laws Rules For Contract Cases
Iowa courts have also adopted the “most significant relationship” test of the Restatement (Second) of Conflict of Laws for determination of conflict-of-laws questions pertaining to contract actions, this time choosing the Restatement’s formulation of the test found in § 188.
Smith,
a. Choice or absence of choice of law in the contract
Under the Iowa conflict-of-laws test for contract actions, the parties may, with certain restrictions, select for themselves the law which will apply to their contract.
Cole,
*1411
Section 188 of the Restatement has reference to the “most significant relationship” rule to determine the law to be applied with respect to the rights and duties of the parties under a contract where the contract did not make an effective choice as to which state law should be applied in construing or enforcing the contract. In determining which state has the most significant relationship to the issue in question various contacts with the different states are determinеd. These contacts include the place of contracting, the place of negotiation of the contract, the place of performance, the locale of the subject matter of the contract, and the domicile, residence, nationality, place of incorporation, and place of business. Also, in determining any conflicts of law questions with respect to the interpretation or enforcement of contracts, the following factors must be taken into account:
“(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.
“(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include
“(a) the needs of the interstate and international systems,
“(b) the relevant policies of the forum,
“(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
“(d) the protection of justified expectations,
“(e) the basic policies underlying the particular field of law,
“(f) certainty, predictability and uniformity of result, and
“(g) ease in the determination and application of the law to be applied.”
See Restatement, Second, Conflict of Laws, Choice of Law Principles, § 6, p. 10.
Wilmotte,
The court in Wilmotte also addressed the requirements of § 187, 7 which applies when *1412 the parties have made a choice of law in the contract:
Restatement Second, Conflict of Laws, § 187, permits the parties to agree on the law to be applied to the contract in most cases so long as it does not override the public policy of a state having a materially greater interest in the transaction.
Id. at 328. This language in the Wilmotte decision is drawn from § 187(2)(b), but this court does not read the Wilmotte decision as limiting the Iowa Supreme Court’s acceptance of § 187 only to that subsection. The other subsections of § 187 were inapplicable to the case before the court in Wilmotte, because the chosen state had a substantial relationship to the parties and the transaction. Id. at 326-328 (New York law was chosen, rather than Iowa law, the plaintiff was from New York, and the arbitration proceedings at issue were in New York; the court concluded that New York had significant relationships as well as being the law chosen in the contract).
b. Consideration of factors for choice of law as to contract claims
In the present case, however, there is no assertion that there is any choice-of-law term in any contract between the parties, nor, indeed, is there any assertion that there was a written contract specifically governing their relationship at all. Rather, Harlan Feeders asserts that it purchased the “Vira Shield” vaccine after receiving various representations about its safety and effectiveness and in reliance on those representations. Thus, for these misrepresentation or breach-of-warranty claims, sounding in contract or quasi-contract, the court must apply the rules applicable when the parties do not make an effective choice of law. Hence, the court will apply the “most significant relationship” test of Restatement (Second) of Conflict of Laws § 188.
Cole,
Application of the factors appropriate to a contract claim leads again to the conclusion that Nebraska law applies to the issues in this case, including the substantive issue of punitive damages. Nebraska was where the parties entered into any agreement concerning the purchase and use of “Vira Shield,” and thus is the place of contracting. Nebraska is also the place where all contacts between the parties took place, and thus is the place of negotiation of any contract. The product was purchased, delivered, and used in Nebraska, thus Nebraska is the place of performance and the locale of the subject matter of the contract, as the cattle treated with the vaccine were all in Nebraska at all relevant times. Finally, the factors of the domicile, residence, nationality, place of incorporation, and place of business of the parties also points to application of Nebraska law. Harlan Feeders is a Nebraska company, and Grand Labs does business there, although it is incorporated in South Dakota. Harlan Feeders has no residence or domicile in Iowa. Although Grand Labs has facilities in Iowa and does business in Iowa, Grand Labs also does business in Nebraska, including the business in question here. Nebraska law should therefоre apply to an contract or quasi-contract issues.
Turning to consideration of the additional factors identified by the court in Wilmotte, the court comes to the same conclusion. The needs of the interstate and international systems do not require imposition of the law of Iowa, because Nebraska law is more appropriate to a cause of action by a Nebraska plaintiff for injuries suffered in Nebraska as the result of contractual relations negotiated in Nebraska. The court has already concluded that the relevant policies of the possible states weigh in favor of selection of Nebraska law. Although Harlan Feeders argues that Grand Labs could reasonably expect Iowa law to apply, because Grand Labs does busi *1413 ness here, this “reasonable expectations” factor also weighs in favor of Nebraska аs the law of choice, because the Nebraska plaintiffs could reasonably have expected Nebraska law to apply to a cause of action arising for an agreement entered into in that state for delivery of a product to be used in that state. The basic policies underlying the particular field of law have been considered, and the court concluded that Nebraska’s rejection of the necessity of deterrence by imposition of punitive damages should be respected. Furthermore, there is greater certainty and predictability to be derived from applying the law of Nebraska to an agreement entered into in Nebraska for purchase and use of a product in Nebraska by a Nebraska business. Finally, the court has had no difficulty in determining what law would apply to the question of punitive damages in either statе.
In these circumstances, the court concludes that Nebraska law, including the law of punitive damages, should also apply to causes of action sounding in contract or quasi-contract.
III. CONCLUSION
The court concludes that defendant Grand Labs’ motion to dismiss punitive damages claims must be granted. The court recognizes that Iowa’s choice-of-law or confliet-of-laws rules distinguish between “substantive” or “rights” questions, on the one hand, and “procedural” or “remedies” questions, on the other. As a threshold determination, therefore, the court concludes that punitive damages are a question of substantive law for three reasons. First, Iowa courts apply the “most significant relationship” analysis to damages questions. Second, the confliet-of-laws analysis of the Restatement (Second) of Conflict of Laws, embraced by Iowa courts, specifically states that mаtters of punitive damages are to be determined according to the law of the jurisdiction chosen by application of the most significant relationship test. Third, the court concludes that consideration of the “substantive/procedural” distinction establishes that the punitive damages laws of both Iowa and Nebraska were plainly substantive. Thus, the court concludes, punitive damages must be considered in this ease in accordance with the substantive law of the state selected by application of Iowa’s conflict-of-laws rules.
Application of those rules to both tort and contract claims yields the conclusion that Nebraska law should apply. The factors to be considered to determine the most significant relationship for both tort and contract causes of action point strongly toward application of Nebraska law, and the court has found that policy considerations do not outweigh such a conclusion. Therefore, Nebraska substantive law applies to punitive damages questions in this case. Because punitive damages claims are prohibited under the Nebraska constitution, Grand Labs is entitled to dismissal of Harlan Feeders’ punitive damages claims.
IT IS SO ORDERED.
Notes
. The court is not confronted at this time with the precise question of whether these causes of action sound in tort or contract. Although the characterization of the cause of action determines the factors to be considered in application of Iowa’s conflict of laws rales, in the present case, the court finds that the conflict of laws rules for both tort and contract point to application of the substantive law of the same state.
. On August 30, 1994, I was appointed United States District Court Judge for thе Northern District of Iowa.
. Iowa Code § 668A.1 provides in pertinent part:
. The two exceptions cited in
Cameron
involve statutes of limitations, and thus are not applicable here. In
Cameron,
although the Iowa Supreme Court admitted that it had "traditionally viewed statutes of limitations as procedural rather than substantive,” citing
Harris v. Clinton Corn Processing Co.,
. Harlan Feeders argues that
Fuerste v. Bemis, 156
N.W.2d 831, 833 (Iowa 1968), is in accord with
Fabricius,
because it quotes
Fabricius'
holding that "the measure of damages [is] determined by the law of the forum.”
Fuerste,
. Section 188 of the Restatement (Second) of Conflict of Laws is as follows:
§ 188. Law Governing in Absence of Effective Choice by the Parties
(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.
(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable tо an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
(3)If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189— 199 and 203.
. Section 187 of the Restatement (Second) of Conflict of Laws is as follows:
§ 187. Law of the State Chosen by the Parties (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
*1412 (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rale of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law.