In a recent interview featured on LegalLawWeek.com, Tom Price, a commercial director in Wragge & Co’s commercial litigation team, discussed the importance of jurisdiction and governing law clauses in contracts.
The interview begins with the question of just what a jurisdiction clause is and why it matters. Price responds, “The jurisdiction clause is the clause that appears towards the end of the contract and sometimes does not get as much attention as it might do at the negotiating stage. It’s the clause that sets out the dispute resolution mechanism for your disputes, should you have them, further up the track. It sets out the courts that are going to hear that dispute, the court of a particular country. If you have decided on an arbitrator, it sets out the arbitration provisions for resolving that dispute. It certainly matters that you have the clause in there because if you don’t, you’re going to be left with uncertainty and expense.”
According to Fulbright’s Litigation Trends Survey, contract disputes remain among the top litigation subjects in both the US and UK. Research also shows that the jurisdiction clause is rarely, if ever, negotiated, leading to risk from the unknown, according to Price.
When building out your Contract Management platform, think of the hundreds or thousands of contracts that will contain a jurisdiction, and possibly a governing law clause too – they’re not the same thing. You need to know what the clauses contain, and better still, you need to know which contracts don’t contain the clause – these are where you’re truly exposed to risk.
Using the right software tool, such as Seal Contract Discovery and Analytics, contracts can be quickly and accurately audited, extracting the relevant clauses which can then be analyzed. Not only will this reveal the jurisdictions and governing law clauses that exist but, perhaps even more importantly, those contracts lacking such clauses can be identified, the risk assessed and action taken.
For more on Seal Contract Discovery and Analytics and our Contract Audit and Assessment solution, click here.