When two parties enter into a contract, it is common practice to include a provision specifying the governing law that will apply to the agreement. This is important because it establishes the jurisdiction under which the contract will be interpreted and enforced.
However, there are times when a contract is silent on governing law, meaning that there is no express provision stating which jurisdiction’s laws should apply. In such cases, the parties must rely on other legal principles to determine the applicable law.
The first step in determining the governing law is to consider the location of the parties at the time the contract was entered into. Generally, the law of the jurisdiction in which the contract was signed will govern the agreement. If the parties are located in different jurisdictions, the law of the jurisdiction with the closest connection to the contract will typically apply.
In the absence of a governing law provision, another factor that may be considered is the subject matter of the contract. Different jurisdictions may have different laws that apply to specific types of agreements, such as employment contracts or real estate transactions.
If the contract is silent on governing law and there is a dispute between the parties, a court may be called upon to determine the applicable law. In making its determination, the court will consider relevant factors such as the location of the parties, the subject matter of the contract, and any applicable international treaties or conventions.
It is important to note that the absence of a governing law provision can lead to uncertainty and potential legal disputes. Therefore, it is always advisable for parties to include a governing law provision in their contracts to ensure clarity and predictability in the event of a dispute.
In conclusion, when a contract is silent on governing law, the parties must rely on other legal principles to determine the applicable law. Factors such as the location of the parties and the subject matter of the contract may be considered in making this determination. However, including a governing law provision in contracts can mitigate the risk of uncertainty and potential legal disputes.