On Friday, Aug. 24, Governor Cuomo signed into law (take a deep breath)... "An act to amend the uniform commercial code, the civil practice law and rules, the lien law, the general obligations law, the banking law, the general business law, the arts and cultural affairs law and the personal property law, in relation to making technical corrections to conform with revisions to the uniform commercial code."
The purpose of the legislation is to fix certain cross-references in several sections of law. This is described in the Memorandum in Support of Legislation for Bill Number A9564, sponsored by NY State Assemblyman Jeffrey Dinowitz. This legislation includes various fixes, and it is relevant to those who deal with contracts that have choice of law provisions that select NY law and contract clauses which refer to NY GOL section 5-1401 to buttress enforceability of such choice. In 2014, changes were made to the NY UCC, including one which moved a concept from UCC 1-105 to 1-301. The concept that changed its statutory location in the UCC relates to the power to choose NY law to govern transactions that bear a reasonable relation to NY ("reasonable relation requirement"). GOL 5-1401 goes further than the UCC in empowering parties to transactions to select NY as governing law by providing that, for transactions covering at least $250k, the parties may select NY law without regard to the reasonable relation requirement in the UCC provision. However, since the 2014 UCC amendments and until now, GOL 5-1401 referred to the wrong UCC provision.
Up until this month's legislation, the inclusion of a specific reference to 5-1401 in a contract, was a reference to a statute that itself referenced the wrong section of law.
The benefits of specifically referencing 5-1401 in a governing law clause are debatable, but it is not uncommon to see contract clauses that select NY as governing law and specifically refer to GOL 5-1401, e.g.:
If the purpose of referencing 5-1401 within a contract clause is to buttress parties' rights to select NY law, then this was arguably not achieved during the time that the technical disconnect between the GOL and UCC existed. Whether or not referencing such section in a contract during the technical disconnect did harm, is a separate question, which, at least going forward, is now moot.
Lawyers may debate the utility of referencing specific sections of any statute within the terms of a contract. It is interesting to note that the sample choice of law provision in New York's Rules of the Commercial Division of the Supreme Court (excerpted below) does not make reference to 5-1401:
"THIS AGREEMENT AND ITS ENFORCEMENT, AND ANY CONTROVERSY ARISING OUT OF OR RELATING TO THE MAKING OR PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO NEW YORK'S PRINCIPLES OF CONFLICTS OF LAW." 22 NYCRR 202.70, App. D (2017), avail. at https://www.nycourts.gov/rules/trialcourts/202.shtml#70 (last visited Aug. 27, 2018).
The Commercial Division's provision does carve out New York's principles of conflicts of law, which is interesting, as one interpretation is that some such principles are likely to support the application of NY law, such that one would not want to carve those principles out. Under such an interpretation, one would be most interested in carving out only the principles that would not support the application of NY law (especially those that support that of another jurisdiction).
It's also worth noting that the highest court in NY has stated that one does not even need to carve out any conflict of laws principles in order to have NY law apply.
“[P]arties are not required to expressly exclude New York conflict - of - laws principles in their choice - of - law provision in order to avail themselves of New York substantive law.” IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 316 (2012), avail. at http://www.nycourts.gov/reporter/3dseries/2012/2012_08669.htm, Google Scholar version at https://scholar.google.com/scholar_case?case=8445181017526440089&hl=en&as_sdt=6,33.