Let’s be honest – when it comes to contracts, no one really wants to read all the fine print. But like it or not, those small details can make a huge difference in how and where disputes are resolved. One of these often-overlooked details is commonly referred to as a “Choice of Law” provision. For Florida businesses with customers or clients elsewhere in the United States or abroad, this provision is especially important.
What Is a Choice of Law Provision?
A choice of law provision is also known as a forum selection or a governing law provision. Essentially, this contractual language allows the parties involved in a contract to choose which law(s) will apply in the event of a dispute or breach of the contract.
For example, if your business is located in the Fort Lauderdale area and you have customers or clients in other parts of the country, you can decide in advance to apply Florida law to each of those contracts – regardless of where the other contracting party is located. Likewise, if your Florida-based company conducts business overseas, you can decide to apply US Federal law, Florida law, or a number of other provisions governing how disagreements will be handled.
In most cases, the law selected in a contract will be decided by the party that has the most bargaining power or by the party creating the contract. Thus, taking the initiative to prepare your own contract, rather than relying upon templates found online or prepared by others, may allow you to select the governing law provision most advantageous for your needs. This can even include provisions mandating that any lawsuits arising from a contract must be filed in your home jurisdiction, such as Miami-Dade or Broward County, Florida.
It’s important to keep in mind that while many states interpret contractual terms the same way, variations in state law can make an enormous difference in the results of your case. Moreover, the cost of fighting a legal battle in another state can prove overwhelming for some business owners. This cost and uncertainty are multiplied when foreign parties and laws are involved, making the choice of law provisions even more important.
Are There Any Exceptions?
Technically, you and the person/entity you are entering into a contract with don’t have to follow the parameters we’ve discussed. However, you should be aware that a court tasked with resolving a dispute would likely consider these factors when determining which set of laws to apply to a contract:
• Whether the contract contains a choice of law provision
• If so, what is the connection between the state/country selected and the contents of the contract
• What is the connection between the state/country selected and parties involved
For a Florida company with customers/clients in the U.S., that means any of the following could be a viable choice of law:
• The state where any of the parties lives
• The state where the agreement was finalized
• The state where your business is incorporated
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