Dinn, Hochman & Potter, LLC

Choice of law provisions in contracts: why they matter

If your company does business with international partners, and especially if these transactions involve buying and selling goods, you may discover that to many foreign business people the American penchant for detailed contracts that seek to anticipate and address as many problem areas as possible is puzzling if not irksome. In the interest of trying to maintain a spirit of harmony during the negotiation process you may be tempted to scale back on some of the details, but one that you should always insist upon is a clearly understood choice of law provision.

International business transactions often carry the promise of great profitability, but if difficulties or disputes arise they can quickly become more complicated when the other side is using a legal system that is different from the one that you are accustomed to. Understanding exactly in advance which country's law will govern in the event of a misunderstanding, or whether an alternative dispute resolution mechanism will be used instead of litigation, will help to either avoid trouble or to expedite finding a solution.

Failing to clearly define what law will apply to an international business transaction can have unintended consequences that can take the agreement into significantly different directions than the ones you envisioned at the outset. For example, most Americans are familiar with the Uniform Commercial Code when it comes to buying and selling goods, but there is another widely-accepted body of contract law used in international transactions -- the United Nations Convention for the International Sale of Goods, that can supplant it if the agreement does not opt out of CISG applicability.

Having a law firm experienced with international business transactions can help you to avoid many jurisdictional and other legal problems when you 

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