Contracts often include a whole lot of language that can be tempting to gloss over, but it’s important to be thorough in reading and preparing contracts so you know exactly what you’re getting into and what each party’s responsibilities are. This will go a long way toward preventing contract disputes in the future.
One of the most commonly overlooked details in contracts is the “choice of law” provision. This is a particularly important provision for Florida businesses that have clients or customers located in other parts of the United States or internationally.
About this provision
The choice of law provision might also be referred to as a governing law provision or forum selection. This specific provision allows parties to the contract to choose the laws that will apply in the event a breach of contract or contract dispute occurs.
Say, for example, you have a business based in Miami, but you have customers or clients located in Oklahoma City. You can choose in the contract whether Florida law or Oklahoma law will apply to these contracts. The same approach applies to businesses located outside of the country—will you apply United States federal law, Florida state law or other laws or provisions?
This allows some flexibility in the event a dispute occurs. In general, it is beneficial to both parties to select the law that provides the most bargaining power. It’s also quite common for parties to simply opt for the law in the region of the party creating the contract. This section in a contract could also include provisions that mandate that any lawsuits that occur as a result of the contract must be filed in a home jurisdiction.
Think through this decision carefully before executing a contract. The different variations of state law can make a pretty large difference in your case results, and the cost of fighting legal battles in other states could become impractical to impossible for some business owners. It becomes even more expensive and complicated if there are foreign entities and laws involved in the dispute, so choosing the provisions is important for any contract.
Any court that is charged with resolving contract disputes will consider the following factors when determining which sets of laws to apply to the contract:
- The presence of a choice of law provision
- If a choice of law provision exists, the connection between the state or country selected and the contract’s contents
- The connection between the state or country selected and the parties involved in the dispute
It is highly recommended that you work with an attorney on drafting contracts, as they will be able to provide you with trustworthy advice on the specific laws to choose for your contract to protect yourself in a potential dispute.
Interested in learning more about contract law and the various choice of law provisions you can include to guard yourself from potential disputes? Contact the office of Ruben J. Padron, PA to speak with an experienced attorney practicing contract law in Miami, FL.
Categorised in: Contract Law