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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)

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Yes, it could even be the laws of a country in which neither reside.

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.

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

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

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.

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

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

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  • This doesn't really address the question of whether the Choice of Law can be a state where neither party lives nor performs business.
    – user45623
    Mar 25 '16 at 2:30
  • It does if you read carefully. (2d sentence). Mar 25 '16 at 18:37
  • I respectfully disagree; the second sentence would be equally valid in any circumstance where the two parties don't work and live in the same state, even if the choice of law had to be one or the other of their two locations.
    – user45623
    Mar 27 '16 at 23:46

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