# Governing Law Clause

Source: https://contracko.com/clause-library/governing-law

# Governing Law Clause

Chooses which country's law governs the contract's interpretation, performance and disputes.

## What it is

A governing law clause selects the substantive law that applies to the contract, for example Dutch law. It is distinct from the jurisdiction or forum clause, which decides which court or tribunal hears disputes. In the EU, party choice of law is broadly upheld under the Rome I Regulation.

## Why it matters

Different legal systems treat the same wording differently, so the chosen law shapes rights, remedies and limitation periods. A clear choice avoids costly conflict-of-laws arguments and gives both sides predictability.

## How to apply it

- Choose a single governing law and state it explicitly and unambiguously.
- Pair it with a matching jurisdiction or arbitration clause.
- Exclude the UN Sale of Goods Convention (CISG) where you do not want it to apply.
- Check whether mandatory rules of another country still apply despite the choice.

## Sample wording

> This Agreement and any non-contractual obligations arising out of it are governed by and construed in accordance with the laws of the Netherlands, excluding the United Nations Convention on Contracts for the International Sale of Goods.

## Negotiation tips

- • Prefer a neutral or your own home law for predictability and lower advice costs.
- • Keep governing law and forum consistent to avoid procedural complexity.

## Common pitfalls

- • Choosing a governing law but a mismatched forum, inviting jurisdictional disputes.
- • Forgetting that mandatory consumer or competition rules may override the choice.

### How Contracko helps

Contracko's AI review extracts governing law and jurisdiction data from every contract and surfaces any mismatches where the chosen law and the dispute forum are inconsistent. With all agreements in one searchable repository, your legal team can instantly generate a portfolio report showing which governing laws apply across your contracts, a key input for cross-border compliance and litigation risk assessments.

## Legal references

- [Rome I Art. 3 Rome I Regulation: choice of law EU law](https://eur-lex.europa.eu/eli/reg/2008/593/oj)
- [BW 6:248 Reasonableness and fairness Dutch law](https://wetten.overheid.nl/BWBR0005289)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Software & SaaS](https://contracko.com/industries/software-saas)[Logistics & Distribution](https://contracko.com/industries/logistics)[Manufacturing](https://contracko.com/industries/manufacturing)[Financial Services](https://contracko.com/industries/financial-services)[Shipping](https://contracko.com/industries/shipping)

## Related clauses

- [Dispute Resolution Clause](https://contracko.com/clause-library/dispute-resolution)
- [Arbitration Clause](https://contracko.com/clause-library/arbitration)
- [Entire Agreement Clause](https://contracko.com/clause-library/entire-agreement)

## Related terms

- [Governing law](https://contracko.com/glossary/governing-law)
- [Jurisdiction](https://contracko.com/glossary/jurisdiction)
- [Boilerplate](https://contracko.com/glossary/boilerplate)

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## Frequently asked questions

Common questions about this clause.

- **Q:** Is governing law the same as jurisdiction?
  **A:** No. Governing law is which law applies; jurisdiction is which court hears the case. They should be chosen together but are distinct concepts.

- **Q:** Can parties freely choose the governing law?
  **A:** Largely yes under Rome I, but mandatory and overriding rules, for example consumer or competition law, can still apply regardless of the choice.

- **Q:** Does Dutch law apply if no governing law is chosen?
  **A:** Not automatically. Under Rome I the applicable law is determined by the closest connection, usually the habitual residence of the characteristic performer, which may or may not be Dutch.

- **Q:** Does a governing law clause affect arbitration?
  **A:** Yes, for the substance. The arbitrators apply the chosen law to the merits. However, the procedural law of the arbitration is typically governed by the law of the seat, regardless of the chosen substantive law.

- **Q:** Should the CISG be excluded when choosing Dutch governing law?
  **A:** Usually yes for contracts involving goods between businesses in different contracting states. The CISG applies by default in those cases unless expressly excluded, and its rules differ significantly from standard Dutch contract law.

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