The laws of which jurisdiction will be the law governing this agreement?

In determining whether to select as the governing law the law of a given jurisdiction, you should consider how well-developed it is and whether in the event of any foreseeable disputes it will be hostile or friendly to your client’s interests. And bear in mind that courts generally require a reasonable relationship between the transaction and the governing-law jurisdiction.

By statute, New York and Delaware have specified that if the amount at issue exceeds a certain amount ($100,000 in the case of Delaware, $250,000 in the case of New York), the parties to a contract may specify that the law of that state governs the contract. See 6 Del. Code Ann. § 2708 and N.Y. Gen. Oblig. L. § 5-1401(1). But courts of another state may not honor that choice. By statute, New York has also specified that if the amount at issue is at least $1 million, the parties to a contract may agree to litigate anydispute in New York; see N.Y. Gen. Oblig. L. § 5-1401(1). Designating New York as the forum would ensure that a New York governing-law provision would be observed even in the absence of any other relationship with the transaction.

For more on governing-law provisions, see chapter 6 of Negotiating and Drafting Contract Boilerplate (Tina L. Stark ed. 2003).

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