What is Governing Law?
The Short Answer
Governing Law explained simply
Governing law is a clause in a contract that states which set of laws from a particular jurisdiction will be used to interpret and enforce the agreement. This is important because laws can vary significantly between states, countries, or even cities. Without a clear governing law, disputes could become complicated and costly as parties argue over which legal system applies.
Real-World Example
The Cross-State Business Deal
Imagine a business in California selling software to a client in New York. Their contract includes a governing law clause stating, "This Agreement shall be governed by and construed in accordance with the laws of the State of California." If a dispute arises, both parties agree that California law will be used to resolve it, even though one party is in New York.
Why this matters
Choosing a governing law brings certainty to your contracts. It helps avoid confusion and potential legal battles over which laws apply if a disagreement happens. This makes the contract clearer and easier to enforce.
Always make sure your contracts clearly state the governing law. It saves a lot of headaches if a dispute ever comes up.
Always make sure your contracts clearly state the governing law. It saves a lot of headaches if a dispute ever comes up.
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