Applicable law refers to which of the following?

• A. State law
• B. Court order
• C. Federal law
• D. Terms of the instrument

Answer: (C)

Applicable law is the set of rules that governs how an instrument is interpreted and enforced. In this case, federal law is the governing framework because the instrument operates under federal authority or because a clause specifies that federal law should apply. When federal law applies, its statutes, regulations, and interpretive standards control how the instrument’s provisions are read, how conflicts are resolved, and whether the instrument is valid. A court order isn’t the governing rule for interpretation, it’s a directive issued by a court. The terms of the instrument are what the instrument says, not the law that applies to it. State law would only come into play if there were no federal framework or if the circumstances pointed to state rules, which isn’t the scenario described here.