Applicable laws: Overview, definition, and example
What are applicable laws?
Applicable laws refer to the specific laws, regulations, and legal frameworks that govern or apply to a particular situation, contract, transaction, or entity. These laws vary depending on the jurisdiction, industry, and context in which they are applied. When parties enter into an agreement or conduct business, the applicable laws are those legal provisions that are relevant to their activities or relationships, including local, national, or international laws.
The term applicable laws is often used in contracts to clarify which laws will govern disputes or legal actions. It ensures that all parties are aware of which legal system will apply if issues arise.
Why are applicable laws important?
Applicable laws are important because they provide a clear framework for resolving legal disputes, ensuring compliance, and protecting the rights and interests of the parties involved. Understanding the applicable laws helps businesses and individuals avoid legal violations, comply with regulatory requirements, and manage risks effectively.
For businesses, identifying the applicable laws ensures that they operate within legal boundaries and adhere to industry-specific regulations. For individuals, being aware of the applicable laws can help protect their rights and avoid unintended legal consequences.
Understanding applicable laws through an example
Imagine two companies, Company A and Company B, are entering into a contract for the sale of goods. The contract includes a clause specifying that applicable laws for any disputes will be the laws of the state of California. This means that if a dispute arises, the parties must resolve the issue based on California state laws, and any court hearings or legal proceedings will take place within the jurisdiction of California courts.
In another example, an individual living in Country X purchases a product from a company in Country Y. The contract specifies that the applicable laws for any legal issues will be the laws of Country Y. If a problem arises with the product, the individual would need to resolve the matter according to the laws of Country Y, even though they live in Country X.
An example of applicable laws clause
Here’s how an applicable laws clause might appear in a contract:
“This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Any disputes arising from or relating to this Agreement shall be subject to the exclusive jurisdiction of the courts of New York.”
Conclusion
Applicable laws are the legal provisions that govern a contract, transaction, or situation. They ensure that the parties involved understand which laws will apply in case of disputes or issues, helping to clarify the legal framework and reduce uncertainty. By specifying the applicable laws in agreements, businesses and individuals can ensure they comply with relevant legal requirements and effectively address potential legal challenges.
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.