Governing Law

A governing law clause specifies which state's or country's laws apply to the contract. Because the same words can be interpreted differently from one jurisdiction to the next, naming the governing law removes ambiguity about which rules apply if there is ever a dispute.

It often travels with a venue or forum clause, which names where any dispute must be heard. A contract might be governed by Delaware law with disputes heard in New York courts, for example. If the contract sends disputes to arbitration instead of court, that is spelled out here too.