Why Governing Law & Jurisdiction Matter in a Contract

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Why Governing Law & Jurisdiction Matter in a Contract

Because of technology, many businesses can serve clients and customers all over the world. It is no longer necessary to restrict your market to your city or your state, no matter how large or small your business. While this is wonderful when it comes to sales, it could present you with some problems if you are ever involved in a contract dispute for two reasons: governing law and jurisdiction.

Governing law

Let’s say you have an Arizona consulting business. You have clients in the state, but you also serve clients out of state. You have signed contracts with your clients, using a standard contract form you downloaded off the Internet. You’ve had no problems with this standard contract — that is until you find you have to sue an out-of-state client for nonpayment.

Where do you file suit? In Arizona or the client’s state? If your standard contract does not include a Governing Law clause that states clearly which state’s law applies to the contract, things have just gotten very complicated.

Jurisdiction

Similar to governing law, a jurisdiction clause in a contract specifies which state controls the contract. However, jurisdiction also specifies which courts have control over the matter.

If you live in Arizona, you probably don’t want to have to hire an attorney in another state to fight for your claim. Having a jurisdiction clause in your contract stating that Arizona has jurisdiction over any issues that arise from the contract will help reduce the cost and inconvenience of pursuing your claim. A jurisdiction clause can also specify which county in Arizona has control over your case.

Having governing law and jurisdiction clauses (or clause; they can be combined) in your contract can make all the difference in whether or not you will be able to enforce the contract. Having no such clause could mean that you have to pursue your client in another state

If you do have a governing law/jurisdiction clause in your contract that favors you in Arizona, it is much more likely that your opponent will be motivated to pay up, since they may not want to have to defend your claim in another state. In addition, it will be much less expensive for you to pursue your claim locally.

The proper venue and jurisdiction for your business lawsuit can be a crucial decision. When you are facing any type of business dispute, you need an experienced Arizona trial attorney to get you the best result possible. Contact Williams Mestaz, L.L.P., at (602) 256-9400 today, and set up an appointment to speak with us about your case.

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