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Choice of Law in International Sales Contracts
Corporate & Business Law Group Update | 10/26/2009
When contracting with a foreign buyer or seller, a domestic company often wants the sale to be governed by local law to enhance predictability in the case of a dispute. However, stating that "California law governs" the contract, for example, does not ensure that a court (domestic or foreign) will apply California law.
The United States is a party to two treaties, the United Nations Convention on Contracts for the International Sale of Goods and the United Nations Convention on the Limitation Period in the International Sale of Goods, both of which apply to many international sales contracts unless expressly disclaimed and which differ in some significant respects from many local laws. Therefore, a domestic company that wants local California law to govern the contract must disclaim the application of the treaties with specific language such as the following:
“The laws of the State of California govern this agreement, irrespective of any applicable conflict of laws rules. The United Nations Convention on Contracts for the International Sale of Goods, the United Nations Convention on the Limitation Period in the International Sale of Goods, and similar treaties, conventions and accords, all as may be amended, do not apply to or govern this agreement.”
In addition, remember that “choice of law” and “choice of forum” differ! Stating that "California law governs" a contract does not mean that the other contracting party is required to file a lawsuit related to the contract in California. If you would like all lawsuits related to a contract to take place in local California courts, you must specify the state and federal courts in which the other contracting party must file all lawsuits.
For more information or questions concerning International Sales Contracts, contact Christopher Kunke, Diane Becker or any member of the Firm’s Corporate & Business Law Group.