Choice of Law, Forum, and Conflict of Laws

As the world gets smaller from a business perspective you have Buyers and Sellers in many different locations. In most locations the parties are free to agree upon what laws will be applied in interpreting the contract in the event of a dispute (referred to a Choice of Law”) and where the case will be heard (referred to as “Forum”).  In some locations such as China if both parties are from the same country, that country’s law must be applied.

When the parties did not establish a forum and the suit is brought in a different jurisdiction than the Choice of Law established, a potential conflict of laws may occur. For example a conflict of laws would occur where there is a difference in laws between the laws of the location where the suit was brought versus the laws of the jurisdiction that the parties agreed the contract would be interpreted under.  In most contract related law suits where the matter is substantive rather than procedural, the Court will apply what the parties agreed was the applicable law.

For example, A Supplier in Florida could sell to a Buyer in California and in the Contract the parties could agree that New York law should be the applicable law.  The case could be brought in Florida or California as both jurisdictions are related to the transaction, and the Court in those states would interpret the contract under New York law.

For example, A Supplier in Florida could sell to a Buyer in New York and in the Contract the parties could agree that New York law will be the applicable law and the forum must be Federal Court in the Southern District of New York, In that case the parties can only bring the case in that forum and the Federal Court would interpret it according to the laws of the State of New York.

In negotiating the applicable law the Buyer and Seller will usually look for applicable laws that are favorable to business. In negotiating the Forum both parties traditionally want to avoid having the forum be any place where the other party would have a distinct advantage and may agree upon a neutral site.

If you learned from this post, think about how much more you could learn from the book.
The book is only US$24.95 plus shipping. The hot-link to amazon.com is above the date.