What Does “Governing Law” Mean in a Contract?
The jurisdiction whose laws will be used to interpret the contract and resolve disputes.
Detailed Explanation
Governing law determines which state or country's laws apply to the contract. This matters because laws vary - California law on non-competes differs dramatically from Texas law. Delaware corporate law differs from New York law.
Governing law is separate from jurisdiction (where lawsuits are filed). You might have Delaware law applied in a New York court, though parties often specify the same place for both.
Example in a Contract
“This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of laws principles.”
Why It Matters
Governing law affects your rights. Some jurisdictions are more favorable for certain types of provisions. Understand which laws apply and how they might affect key provisions like non-competes, liability limits, or arbitration clauses.
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