Governing law and jurisdiction: Overview, definition and example
What is governing law and jurisdiction?
Governing law and jurisdiction refer to the provisions in a contract that specify which legal system’s rules will apply (governing law) and which court or legal authority will have the power to resolve disputes (jurisdiction). These clauses provide clarity and certainty about the applicable laws and forums in case of disagreements between the parties.
For example, a contract between a New York company and a California company might specify that New York law governs the agreement and that disputes will be resolved in New York courts.
Why are governing law and jurisdiction important?
Governing law and jurisdiction are important because they prevent confusion and disputes about which legal system applies to the contract and where legal actions must be brought. By defining these terms upfront, parties reduce uncertainty, streamline dispute resolution, and avoid potential conflicts arising from differences in laws across regions or countries.
These clauses are particularly critical in multi-jurisdictional or international agreements, where differing legal systems could lead to complexities if not explicitly addressed.
Understanding governing law and jurisdiction through an example
A software company in Texas enters into a licensing agreement with a client in Florida. The contract includes a governing law clause specifying that Texas law applies and a jurisdiction clause stating that any disputes must be resolved in Texas courts. If a disagreement arises, the parties know which legal rules will govern and where the matter will be adjudicated.
An example of a governing law and jurisdiction clause
Here’s how a governing law and 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 law principles. Any disputes arising under or in connection with this Agreement shall be subject to the exclusive jurisdiction of the courts of [Insert State or Country].”
Conclusion
Governing law and jurisdiction clauses are essential for providing clarity and predictability in contractual relationships. By explicitly defining the applicable legal framework and dispute resolution forum, these provisions reduce uncertainty, prevent conflicts, and ensure a smoother resolution process if disputes arise. A well-drafted governing law and jurisdiction clause supports fairness and efficiency in contract enforcement.
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.