conflict of law
Definition
Conflict of law refers to the situation where two or more states or countries have different laws that could apply to the same dispute, and a court must decide which set of rules to use. This commonly comes up in business when a contract, transaction, or dispute involves parties or events in different locations. Courts use specific legal tests to figure out which jurisdiction's laws make the most sense to apply.
Example
If your Texas-based business signs a contract with a California supplier and a dispute arises, a court may need to decide whether Texas or California contract law governs the case, which could lead to very different outcomes depending on which state's rules apply.
Watch Out
You can often avoid this uncertainty by including a 'choice of law' clause in your contracts that specifies upfront which state's laws will govern any disputes.
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.