Clause guide
Governing Law clause: meaning, risks, and what to negotiate
Specifies which jurisdiction’s laws will be used to interpret the contract.
What it means
The chosen law can affect how disputes are interpreted, what remedies are available, and how predictable the legal outcome may be.
Common risks
- • The chosen jurisdiction may favor the other side.
- • You may face unfamiliar legal standards or higher legal costs.
- • It may not match the venue or dispute-resolution clause cleanly.
What to check before signing
- • Which state or country’s law applies?
- • Does it align with the forum or venue clause?
- • Is the chosen law commercially reasonable for both parties?
Negotiation ideas
- • Use a neutral or mutually convenient jurisdiction.
- • Align governing law with venue and dispute resolution terms.
- • Avoid obscure or one-sided jurisdictions where possible.
Example clause
“This Agreement and any dispute arising out of or relating to it shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of laws principles.”
Frequently asked questions
Is governing law the same as venue?
No. Governing law decides which law applies. Venue decides where the dispute is heard.
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