The number of global business transactions are at an all-time high, as the world is becoming increasingly interconnected. Individuals and businesses alike are entering into a greater number of contracts with parties from other jurisdictions, both foreign and domestic. Therefore, it is imperative that one hires an attorney to draft a clear choice-of-law provision that would create certainty for all parties involved.

Drafting a clear choice-of-law provision involves many considerations, including whether the law of the jurisdictions are the same or similar, the practices and procedures of those jurisdictions, the jurisdiction's power to order non-consenting parties to mediation, the evidentiary rules of the jurisdiction, and the calculation of damages in the event of a breach of a contract. 

It is also important to understand that a choice-of-law provision may be drafted to limit or restrict rights that might otherwise exist, such as a clause that requires any disputes between the parties to be settled by mediation instead of it going to court.

Courts will generally honor a carefully drafted choice-of-law provision. However, if the provision is not well drafted, or if the contract lacks a choice-of-law provision altogether, the laws of the forum (the jurisdiction where the lawsuit is initiated) may govern the dispute. 

A choice-of-law issue can involve domestic or foreign (or international) jurisdictions.  A domestic choice of law issue emerges in the United States when parties involved in the conflict are domiciled in different states. An international choice of law issues emerges when two or more foreign jurisdictions are involved in the conflict.

In New York, the “center of gravity” theory governs any choice-of-law application. In determining the center of gravity, courts will give emphasis to the place which has the most significant contacts with the matter at issue. The five significant contacts a court will consider in a contract case are: 

(1)the place of the contracting; 

(2)the place where the negotiations occurred;

(3)the place where performance of the contract occurred; 

(4)the location of the subject matter of the contract; and 

(5)the domicile of the parties.  

The law that is applied to a dispute will often have a decisive impact on the outcome. You would be well advised to hire an attorney that will draft a choice-of-law provision to cover not only how the contract should be construed, but also to cover all of the different types of claims that may arise out of or in connection with the parties' contractual relationship.

If you have any questions or concerns about this blog or would like to schedule a free consultation, you may contact Courtney by email at anderson.guangzhou@anallp.com .

Disclaimer: This Blog is made available by Anderson & Anderson LLP for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and Courtney Delano West, Esq. or Anderson & Anderson LLP. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or country.