Choice of Law in Contracts - Should You Care?

Typically, when entering into an agreement with a party in another legal jurisdiction (most commonly in the USA for BC clients) the parties specify what laws govern the interpretation of  the agreement. The legal ramifications can be substantial. The choice of law can also give one of the parties a substantive procedural advantage should a dispute arise. Vendors often find themselves torn between accepting the purchaser's demand that its law applies and closing the sale.

My objectives when negotiating are always to equalize the balance of power to the extent possible and to build into the agreement an incentive in the event of a dispute to encourage the parties to negotiate rather than litigate.

One alternative that I have successfully used many times in the past is to negotiate that the laws of a jurisdiction where neither party is resident applies. This way, neither party has a comfort level of 100% as to the consequences of the choice. Choosing the laws of the state of Washington for clients of mine in BC has been a favoured choice by them.

Concurrently with negotiating the law that will apply to the agreement, the parties should also negotiate the venue where any disputes will be resolved. I will address this topic in a future blog post.

GARY DUNN, LAWYER & MEDIATOR

610 - 1665 WEST BROADWAY AVENUE

VANCOUVER, BC V6J 1X1, CANADA

+1 604-739-7011

GARY@DUNN.COM

 

DISCLAIMER

THE FOREGOING IS NOT INTENDED TO CONSTITUTE LEGAL ADVICE. YOU SHOULD CONTACT YOUR LEGAL ADVISOR ABOUT YOUR SPECIFIC LEGAL PROBLEM.