Question 1

Does governing law have to be where you live?

Accepted Answer

No. Parties can choose any jurisdiction's law, even a neutral one where neither party is located (Delaware is popular for corporate contracts). But courts may not honor a governing law choice that has no reasonable connection to the deal. A contract between two Oregon companies choosing Nigerian law would raise eyebrows.

Question 2

What if there's no governing law clause?

Accepted Answer

Courts apply 'conflict of laws' rules to determine which jurisdiction's law governs. This analysis considers where the contract was signed, where it's performed, and where the parties are located. It's unpredictable and expensive to litigate. A one-sentence governing law clause prevents all of this.

Question 3

Can governing law be different from where you go to court?

Accepted Answer

Yes. A contract can say 'governed by Delaware law' but 'disputes resolved in New York courts.' This means a New York judge applies Delaware law. It's common in corporate deals. The governing law clause controls which rules apply; the venue clause controls where you physically show up.

Question 4

Why do so many contracts choose Delaware law?

Accepted Answer

Delaware has well-developed business law, a specialized Court of Chancery with judges (no juries) who are experts in corporate disputes, and decades of predictable case law. Companies choose Delaware because they know how its courts will interpret contract terms. Predictability is worth a lot when the stakes are high.

Question 5

Does governing law affect employment contracts?

Accepted Answer

Yes, and it can be a dealbreaker. Employment laws vary wildly state to state. California offers strong employee protections and bans non-competes. Texas is more employer-friendly. If your employer wants Texas law to govern your employment contract but you work in California, the California-specific protections may still apply — state labor laws often override the governing law clause.

Governing Law

Definition

In Practice

Common in these contract types

Related terms

Frequently asked questions about governing law

Create a contract with proper governing law clauses