3.7.3.2.4 Interaction of borrowing statute and law of state chosen in the contract

Another issue is whether a forum state’s borrowing statute applies when the credit agreement chooses the law of a particular state. Specifically, which limitations period applies—that of the state provided for in the agreement or that of the state specified in the borrowing statute?

As a preliminary matter, the contractual choice of law should not even be considered if the collector has not proven that the consumer is bound by a particular contract that contains the choice-of-law provision. The collector may not be able to do so, particularly if its claim is based on account stated or another claim not based on a contract. Also, when the choice-of-law provision in the contract happens to select the law of the particular forum state, then that state’s laws clearly apply—including that state’s borrowing statute.³⁰⁸

Some states find the statute of limitations to be procedural, so a contractual choice-of-law provision does not even apply to the limitations period.³⁰⁹ Thus, these states will never find a borrowing statute superseded by a contractual choice-of-law provision.³¹⁰

Finally, even if the limitations period is not viewed as procedural, the standard rule is that courts will apply a shorter forum state’s limitations period rather than a longer limitations period provided for in the contract.³¹¹ Since the borrowing statute is one aspect of the forum state’s statute of limitations, the borrowing statute applies when it provides for a shorter limitations period than that provided for in the contractually chosen law.