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  1. #1
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    Default How Necessary is a Governing Law Clause in Contract Terms

    My question involves business law in the state of: All states.

    This question is specifically about policy notices on websites such as terms of use, privacy policy and disclaimer.

    How important is it to have a governing law and jurisdiction clause. I've looked at a lot of policies on a lot of websites. Some have a governing law and jurisdiction clause. others do not. I know nothing about the law but researching online, this is how I understand it. A governing law and jurisdiction clause specifies which laws and jurisdiction will be used to settle disputes. Without that clause jurisdiction is where the parties are. Since it's hard to sue someone in one state from another, the suit generally happens where the party being sued is. You can't sue someone in Wyoming in a Florida court. So without a governing law clause, doesn't it effectively default to the location of whatever party is being sued? So unless someone what's to specify a different state, for example they are in Wyoming but what to use Nebraska law and jurisdicton for some reason, is it a necessity to have a governing law clause?

  2. #2
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Even without the clause, one can't file a suit in a state that has no jurisdiction. Let's A is in FL and B is in WY. Unless there is an unusual issue they can't sue in Nebraska.

  3. #3
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting smallbiz
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    So without a governing law clause, doesn't it effectively default to the location of whatever party is being sued?
    Not necessarily. The suit may be filed by the plaintiff in any jurisdiction in which the defendant is subject to personal jurisdiction and where the court would have subject matter jurisdiction. While the state where the defendant resides would certainly have personal jurisdiction over the defendant, it is possible that one or more other states would also. That will depend on what contacts the defendant has in those other states and what those states' long arm statutes provide. Long arm statutes are the laws each state has regarding assertion of personal jurisdiction over out of state defendants.

    Note that personal jurisdiction refers to the court's power to decide matters over the particular person involved. Subject matter is the power of the court to decide the particular issues that are in dispute. One can consent to personal jurisdiction of a court that otherwise would not have personal jurisdiction over him/her. But the parties cannot create subject matter jurisdiction in a court that otherwise would not have subject matter jurisdiction. A court needs both personal jurisdiction over the parties and subject matter jurisdiction in order to hear the case.


    Quote Quoting smallbiz
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    So unless someone what's to specify a different state, for example they are in Wyoming but what to use Nebraska law and jurisdicton for some reason, is it a necessity to have a governing law clause?
    If all the parties are in the same state then there would be little use for provisions regarding governing law and jurisdiction in most circumstances. It is more useful to include such provisions where the circumstances are such that more than one state may have jurisdiction over the dispute; in that case deciding ahead of time which one of them will provide the applicable law and forum for the dispute allows the parties to have certainty as to how disputes will be resolved. In many consumer contracts with large corporations those provisions allow the large corporation to specify a single place for resolution of any disputes it has with consumers, often with the applicable law or court rules that are most favorable to the corporation.


    Quote Quoting PayrolGuy
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    Even without the clause, one can't file a suit in a state that has no jurisdiction. Let's A is in FL and B is in WY. Unless there is an unusual issue they can't sue in Nebraska.
    For the sake of clarity, A and B certainly could consent to personal jurisdiction in Nebraska if they wanted. The issue though is whether the Nebraska court has subject matter jurisdiction to hear the case. If it lacks subject matter jurisdiction then the case could not be brought there even though the parties are willing to consent to personal jurisdiction.

  4. #4
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Yes, I read about personal jurisdiction as well. A policy can't arbitrarily specify a state. There has to be a reason for it such as substantial business dealings within that state or a physical presence like a warehouse.

    So the way I understand it is that stating governing law and jurisdiction is essential for a large company with business or physical infrastructure in all 50 states. To avoid having to contend with possible disputes in the courts of all 50 states, it's essential to specify the law and courts of one state. For a small business that only has one location, even if it has a website that can be accessed globally, that one physical location effectively sets the governing law and jurisdiction even if it's not stated. Is that a fair understanding?

  5. #5
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting smallbiz
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    For a small business that only has one location, even if it has a website that can be accessed globally, that one physical location effectively sets the governing law and jurisdiction even if it's not stated. Is that a fair understanding?
    No. It is not just physical location that matters. Personal jurisdiction is a function of two things. First, the U.S. Supreme Court has held that for a state to have personal jurisdiction over a non resident the person must have sufficient minimum contacts with that state. Minimum contacts can be something other than a physical presence in the state. For example, deliberately marketing to and selling to the residents of that state may be enough for a business to be subject to the jurisdiction of that state. Beyond that, it also matters what the state long arm statute says. Some states provide that they exercise the full jurisdiction over out of state defendants that the Constitution allows, other states have decided to use a more restrictive rule.

    If you are contemplating starting up a business that will sell goods or services over the internet I would strongly advise you to get advice from a business attorney in your state for help in drafting your terms of service (TOS) and contracts to ensure you are well protected.

  6. #6
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting Taxing Matters
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    If you are contemplating starting up a business that will sell goods or services over the internet I would strongly advise you to get advice from a business attorney in your state for help in drafting your terms of service (TOS) and contracts to ensure you are well protected.
    Thanks. I'm not selling goods or services. It's an informational website. I guess that it can be classified as a blog.

  7. #7
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting smallbiz
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    Thanks. I'm not selling goods or services. It's an informational website. I guess that it can be classified as a blog.
    Then you need to understand the TOS of this website and copyright law, at least if you are considering quoting what has been written here.

  8. #8
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting jk
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    Then you need to understand the TOS of this website and copyright law, at least if you are considering quoting what has been written here.
    I don't understand why you are saying that. When did I say I was going to quote what was written here? Your post seems to come out of nowhere. But since you brought it up, I just looked at the TOU of this website and noticed that it doesn't have a governing law clause. Is that why you wanted me to look at it?

  9. #9
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting smallbiz
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    I don't understand why you are saying that. When did I say I was going to quote what was written here? Your post seems to come out of nowhere. But since you brought it up, I just looked at the TOU of this website and noticed that it doesn't have a governing law clause. Is that why you wanted me to look at it?
    did you actually read what I wrote? If so, you would understand I wrote a conditional statement. I ended it with

    it you are intending on quoting what was written here


    it’s really self explanatory. If you aren’t, then my statement doesn’t apply. If you are, then following what I suggested would be a good idea.

  10. #10
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    Default Re: How Necessary is a Governing Law Clause in Terms?

    Quote Quoting jk
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    did you actually read what I wrote? If so, you would understand I wrote a conditional statement. I ended it with

    it you are intending on quoting what was written here


    itís really self explanatory. If you arenít, then my statement doesnít apply. If you are, then following what I suggested would be a good idea.
    I read it. As I said, your comment came out of no where. It's a complete non sequitor. But thanks for pointing me to the TOU of this website as another example of a policy that doesn't have a governing clause. It seems it isn't all that necessary. I would think that if it were, a forum discussing legal issues if anything would have one.

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