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International Contracts: Choice of Law when the Parties Disagree

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This post is based on an OnStartups.com question (edited here) that I answered a few minutes ago. Q. I am drafting a website-development agreement with a firm in India. I am in Australia. I prefer that the agreement be governed by Australian law, but the developer prefers Indian law. What is normally done in similar circumstances?

A. Several thoughts based on my experience in similar matters:

  1. While governing law is important, venue – i.e., where a lawsuit must be filed – is even more important tactically if a dispute arises.
  2. If there is a great disparity in negotiating power between the parties, the one with the greater power is likely to prevail on this issue (and many others).
  3. If a compromise is desired, choose a neutral country (with an appropriate legal system) for governing law and venue. In your part of the world, Singapore could be a good choice.
  4. An approach that will reduce the likelihood of a lawsuit being filed: If one party initiates a legal action, it must be filed in the other party’s country, and that country’s law will govern.

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
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