Governing law

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Governing law
/ˈgʌvənɪŋ lɔː/ (n.)

The law by which one’s contract is governed. If it spans international borders, ideally English, but New York law always a good safe choice as long as you don’t mind the odd convenient logical impossibility for your trouble. If it doesn’t, the local laws and customs should do fine, and you shouldn’t waste your time talking about them.

If you’ve ever despaired at the pernicketiness of governing law clauses such as this:—

This agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

Then you have the Rome II EU Regulation to blame. Enacted in 2007, it applies to all EU Member States and is designed to harmonise the “conflict of laws” rules across Member States dealing with with non-contractual disputes.

Non-contractual obligations

In this context breach of “non-contractual obligations” includes actions based on tort (e.g. negligence), competition law and statutory duty. But, fabulously, not those arising out of the negotiable nature of bills of exchange, cheques and promissory notes and other negotiable instruments, or company law or defamation — though it’s hard to see how you could have a non-contractual obligation to defame someone.

But the main thing is to ensure any concurrent claims in contract and tort can be — must be — decided in the same forum. This is mostly interesting where the parties to a contract are in different jurisdictions, and each will prefer their own jurisdiction to hear a non-contractual dispute. But even there, frankly, a concurrent claim in tort would only be relevant in most cases to builders.

Of course, the sensible thing would be to expressly exclude tort claims under the contract. But for those not prescient enough to do that, there’s always this magic incantation.

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See also

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• Writing for a judge
• Governing Law - ISDA Provision
• Exclusive jurisdiction
• Governing Law and Jurisdiction - GMSLA Provision
• Rome II

References

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