choice of law
Definition
Choice of law refers to a clause in a contract that decides which state's (or country's) laws will govern any disputes between the parties. Businesses include this because laws vary significantly from state to state, and without it, a court might apply rules you never anticipated.
Example
If your business is in Texas but your contract says 'this agreement is governed by the laws of Delaware,' then a judge will apply Delaware law to resolve any disagreement, even if neither party is based there.
Watch Out
The state you choose can dramatically change your rights and obligations, so never just copy this clause from a template without understanding how that state's laws actually affect your specific situation.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.