Choice of Law clauses are often very important clauses in contracts. However, they’re not always that critical. Sometimes, especially in real estate or in-person consumer contracts, the law that is to be applied is chosen for you. For example, the purchase of a piece of real estate generally must be governed by the laws of the state where the real estate is located. These clauses become very important in business-to-business contracts that take place over multiple states.
Having a choice of law clause not only helps ensure you get the law you want, but also helps save litigation costs. Fighting over which law applies is just another thing to raise the cost of litigation. A small amount of planning can save thousands at trial.
What follows are several choice of law clauses for varying purposes. I’ve written each of them and shared why I would use a particular clause. As always, be cautious when copying and pasting from the internet! It’s not my problem if you misused this information.
Choice of Law – Simple
This Agreement is subject to the laws of North Carolina excluding only its choice of law statutes.
I like to use this one when my clients want a simpler, friendlier contract for their customers. It has everything essential to be enforceable without anything extra. It’s also clearly readable by lawyers and non-lawyers alike. It’s actually my favorite! Simplicity is better!
Choice of Law – Boilerplate
This Agreement is made in North Carolina, and the rights and obligations of the Parties hereunder shall be interpreted, construed, and enforced in accordance with the laws of the State of North Carolina (excluding only its choice of law rules).
I store this one in a document for the purpose of copying and pasting into contracts. Enterprise contracts expect this style of clause because it is better at spelling out the applicability of the clause. “Interpreted, construed, and enforced” is clearer than just saying North Carolina laws apply. This clause spells out the “rights and obligations,” which aren’t explicitly spelled out in the simple clause.
Choice of Law – Federal Versus State
This Agreement is made in North Carolina, and the rights and obligations of the Parties hereunder shall be interpreted, construed, and enforced in accordance with Federal laws where applicable and otherwise, the laws of the State of North Carolina (excluding its choice of law rules).
Many contracts deal with a lot of federal law. Organizations that do federal contracting, international business, or a lot of intellectual property work will typically need a more expansive choice of law clause that spells out more specific areas that federal law applies. I’ve seen clauses longer than a page because of the various specifics that need to be addressed.
Conclusion
As with every clause in a contract, the permutations are endless. I value simplicity. However, simple is not always better. Hopefully these clauses will help you when drafting or evaluating your contract.
If you’d like to know more about choice of law provisions, feel free to contact us at info@lawplusplus.com or call (919) 912-9640.