Governing law

Governing law is the system of law that applies to a contract. It decides how the words are read, what each party's rights are, and what happens if someone breaks the deal. It is usually set out in a governing law clause near the end of the contract.

Governing law is separate from jurisdiction. Governing law is which law applies; jurisdiction is which courts hear a dispute. They often point to the same place but can differ.

When the parties are in different countries, each often prefers its home law. Without a clause, working out which law applies can itself become a dispute, which is a common reason the clause is included. Some rules may still apply whatever law the parties choose, such as certain consumer protections.