Can a contract specify that it will be followed by the law of a state neither party resides in?
<p>I have had a client approach me with a contract that includes a section specifying that the contract will be governed with the laws of a specific state, but neither the client nor myself live or perform business in that state. Does the section still apply? (This is within the United States)</p>

<p>Yes, it could even be the laws of a <em>country</em> in which neither reside.</p>

<p>An example of where you might want to do this is where a South Korean component manufacturer subcontracts with a Japanese manufacturer for a machine for a US supplier to be installed by a Mexican subcontractor to a French contractor in a mine in Canada designed by a Russian engineer. It may make sense for them all to be under Albertan law.</p>

<p>It is common for contracts to have a CHOICE OF LAW clause or a CHOICE OF FORUM clause (or both). Such clauses are valid.</p>

<p>The former is use for predictability in the interpretation of the contract. The latter is for predictability where disputes will be brought.</p>

<p>Typically one uses a choice of law clause where either there is some advantage to the drafter or where the law is settled in the area related to the contract.</p>

<p>For example, some states allow restrictive non-compete clauses while others frown on them entirely. </p>

<p>A escape route from a choice of law clause is if a provision can be shown to be contrary to public policy.</p>

contract-law jurisdiction