Choice of Law Clause

The Definition

A choice of law clause is a specific term in a contract where the parties agree that any disagreement that occurs within the contract can be dealt with according to the law of a particular jurisdiction. This is also called a "proper law clause."

Further Explanation of a Choice of Law Clause

Due to many businesses, organizations, and deals done on a sub-national, national, or international level, a choice of law clause within a contract will specify where a dispute will be determined in court. Since there are such differences in the way business is done or gone about in various areas, having this type of clause will allow the seller of goods or services to choose where they want their dispute to be heard, and the court of their liking. If the outcome of the dispute would have highly different results in one court compared to another, the choice of law clause becomes much more relevant in this case. Normally, the choice of law clause is beneficial for the seller of goods or services to choose a jurisdiction within their residing county, state, or nation.

Example of a Choice of Law Clause in a Contract

Normally, choice of law clauses within a contract are very brief. There are not many details added to the clause to make it a long or wordy part of the contract. In fact, it is very cut and dry, normally only being one to two sentences long. Here is an example of what one might look like:

"In case of any dispute within this contract, this agreement shall be governed by the laws of the commonwealth of New York."