Virtually all businesses rely on contracts of one kind or another, whether your business is wholesale, retail or service-oriented. Before you send another contract out for signatures, or sign one on behalf of your business, review the paragraphs related to choice of law. Even though these provisions may seem insignificant at the outset, they will become critically important in the event of a contract dispute.
What are choice of law provisions?
Choice of law provisions dictate which forum and law will apply to future contract disputes between the parties. Choice of law provisions are generally upheld in Texas if:
- The contract bears a reasonable relationship to the state whose law is chosen to govern; and
- Application of the chosen law does not violate a strong public policy that would otherwise protect a party.
If you do business with a vendor, supplier, contractor or client out of state, your contract can contain a requirement for any contract disputes to be litigated in Texas. If your choice of law provisions don’t meet the requirements stated above, however, you may find yourself prosecuting or defending a claim in a distant state whose contract law or case precedents don’t align with Texas law.
What does “reasonable relationship” mean?
Generally, the reasonable relationship requirement can be satisfied is one of the parties to the contract is incorporated in Texas or resides in Texas. Of course, if Texas law is not as favorable to your particular type of contract as another state, you can choose another state altogether – the key lies in understanding the way Texas courts tend to view the contract in question. Get advice from a Texas business lawyer you trust on this issue.
Let an experienced Texas business litigation attorney review your contract
At Peterson Law Group, our business litigation attorneys are skilled in drafting and interpreting complex contracts. We explain the law as it relates to your specific circumstances and recommend options to protect you and your business. Schedule a consultation today by calling 979-703-7014 or visit us online to request a meeting.