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Dec 09

Jurisdiction Selection Clauses

Most agreements contain clauses which select the law of the jurisdiction, the Jurisdiction Selection Clause, which controls the interpretation of the agreement. Many business people fail to realize that this selection will also, for the most part, determine the law which controls any dispute over the contract as well.

We have run into several cases where clients do not understand the significance of this factor. For instance, if you are buying goods from a Turkish company and the purchase order has language which states that Turkish law controls the agreement, then you have a significant limitation which is placed on you once you accept goods under an invoice. Specifically, Article 23 of the Turkish Commercial Code contains a provision which stipulates that “A person in receipt of an invoice is deemed to have accepted its contents unless there is an objection to the invoice or its contents within eight days from its receipt”. This kind of law catches the unsuspecting foreign purchaser of non-conforming goods by surprise by specifically limiting the purchaser’s right to sue for breach of contract by placing a short trigger period and notice requirement on the claim. One may not suspect that by the simple statement that the “purchase order is controlled by Turkish Law” that this brings into effect other provisions of the law which may be vastly different from your home jurisdiction’s laws.

This same sort of issue comes up daily with foreign businesses entering into transactions with US businesses. US businesses will often insist that transactions have agreements controlled by the law of a specific US state in which that business is located. While most US states have very similar contract law to other nations following the English Common Law tradition, there are some very substantive differences which are singular to American law, and other important differences on how a conflict will be treated depending on what state’s law applies to the contract or any dispute.

Before you sign the agreement for your foreign business (be it Kiwi or other country), contact the US attorneys at Norris Echetebu Law and the Norris Law Firm for a consultation on how this important and often overlooked clause could affect your rights.