Aligning Governing Law and Venue

Rethinking Choice of Law and Venue in Contracts

This tip about rethinking how we select our contract's choice of law and venue.

Here’s what I see happen most of the time in B2B contract negotiations in the U.S.:

- We select New York, Delaware, or California as governing law because other parties will approve that choice.
- If we use litigation, the party with more bargaining power requires the venue be in its hometown.

This approach can result in a very messy situation with extra hassles and legal fees.

The Hidden Costs of Mismatched Law and Venue

That hometown court, if not the governing law jurisdiction, has a much more complex job ahead. It has to apply its own procedural laws and apply the substantive law of a different state.

The parties will either pay two sets of lawyers for that or pay one set of lawyers to manage a more complex proceeding under two different laws.  

And things get even messier if there are issues that fall into the gray area overlapping substantive and procedural laws, like statutes of limitation. I find myself thinking, "Why are we creating this mess for our clients?"

Make it easier and cheaper for our clients to resolve things if they do go sideways. The better option is to use the same state for both governing law and venue.