Jurisdiction and Choice of Law: What’s the Difference?
Many people when they draft contracts give little thought to what law will apply to the contract, should it have to be enforced or interpreted by a court. But choice of law provisions can be very helpful to your business, especially if you do business nationwide.
What is a Choice of Law Provision?
As the name implies, a choice of law provision tells a court what state’s law will apply to any legal issues related to the contract.
But why not just apply Florida law, assuming you are a Florida business?
There are certainly benefits to using Florida law, the main benefit being that you and your attorneys may be most familiar with the law of Florida. Even a judge, called on to interpret or enforce your agreement, will be more educated on Florida law than that of another state.
Choosing Your State Law
But often, Florida law is not as favorable to you or your agreement, as the law of another state may be. Some states may have laws that have better laws on interest rates, or may have laws that more tend to favor businesses, or laws that are just easier for your business to enforce its contracts.
And even if you are using Florida law, you should still have a provision in your contract that says that.
That’s because should you have to sue, or should you get sued, by a business or person in another state, a court will end up having to determine which state’s laws apply. But by having a provision in your contract that applies Florida law (or whichever state’s laws you choose), you ensure that no matter where the other side of the contract is located, and no matter where the lawsuit is actually filed, the law of the state you have chosen, will be used.
What About Jurisdiction and Venue?
Note that saying that the law of a particular state will be used in a case, does not automatically give a court jurisdiction over a party. It is possible that if you have a lawsuit that involves a party that doesn’t do business in, and has no contacts with, the State of Florida, you still may end up with a lawsuit in another state—even if the laws of Florida will be used.
Jurisdiction is a different matter. Jurisdiction just tells the parties which court will have the ability to hear a case. This can be helpful when the other side to the contract is located in a different state, or when you routinely do business or sign contracts with people in multiple states.
A jurisdictional or venue clause ensures that any case, whether you file it or its being filed against you, can only be filed in a court that is geographically convenient for you. This can lower your litigation costs, and allow you to use the business law attorneys that you are used to using.
Do you have everything you need in your business law contracts? Call the West Palm Beach business litigation lawyers at Pike & Lustig today.
