Applicable law and consent to jurisdiction: Overview, definition and example
What is applicable law and consent to jurisdiction?
Applicable law and consent to jurisdiction refer to contractual provisions that determine which legal framework governs the interpretation and enforcement of the contract (applicable law) and which court or jurisdiction will have the authority to resolve disputes (consent to jurisdiction). These clauses provide clarity and predictability for resolving legal matters that may arise under the agreement.
For example, a contract between parties in different countries might specify that the agreement will be governed by New York law, and disputes will be resolved in New York courts.
Why are applicable law and consent to jurisdiction important?
These provisions are important because they reduce uncertainty and potential conflicts over which laws or courts will apply in case of a dispute. They help parties avoid the complexity and expense of litigating in unfamiliar or unfavorable jurisdictions.
For businesses, specifying applicable law and consent to jurisdiction ensures a clear legal framework for enforcing the agreement, promoting fairness and efficiency in resolving disputes. For cross-border transactions, these provisions are especially critical to avoid ambiguity in international legal contexts.
Understanding applicable law and consent to jurisdiction through an example
Imagine a company based in California signs a supply agreement with a manufacturer in Texas. The contract specifies that the applicable law will be Texas law, and the parties consent to the exclusive jurisdiction of Texas courts for resolving disputes. If a disagreement arises, both parties know upfront that Texas law will govern the interpretation of the contract and that any litigation will take place in Texas.
In another example, an international sales contract between a U.S. exporter and a European buyer specifies that the contract is governed by English law, and disputes will be resolved in the courts of London. This clarity ensures both parties understand the governing legal framework and where disputes will be adjudicated.
An example of an applicable law and consent to jurisdiction clause
Here’s how an applicable law and consent to jurisdiction clause might appear in a contract:
“This Agreement shall be governed by, and construed in accordance with, the laws of the State of [Insert State], without regard to its conflict of laws principles. Each Party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in [Insert Location], for the resolution of any disputes arising out of or relating to this Agreement.”
Conclusion
Applicable law and consent to jurisdiction clauses provide essential clarity and predictability for resolving disputes under a contract. By specifying the governing legal framework and the chosen forum for litigation, these provisions minimize legal uncertainty, reduce costs, and ensure fairness. For businesses, including these clauses in agreements is a key step in managing risks and protecting their interests in both domestic and international transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.