Mallorca Insights

Why is it important to determine the applicable law and the place of jurisdiction in contracts of all kinds?

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In cross-border legal transactions, there are two important aspects that are often overlooked, but are crucial: on the one hand, the choice of applicable law and, on the other hand, the choice of jurisdiction. These two factors can have a significant impact on the course of a contractual dispute and the enforceability of claims and demands. Therefore, it is crucial for any party, be it an individual or a company, to carefully consider these considerations when drafting and signing contracts of all kinds.

Choice of applicable law

The applicable law chosen determines the legal system of the country which is to be applied to the contract in terms of content. In international transactions or contracts between parties from different jurisdictions, the selection of applicable law can be complex and difficult. The parties must agree on which law applies to the contract, since the different legal systems may also have different effects on the contract because of different rules and regulations. As a rule, each party will prefer the law of their country or will want to choose the one that is preferable to them. In this context, consideration should be given to whether it is possible to resort to a neutral law, such as the UN Convention on Contracts for the International Sale of Goods, and to prioritise it as the applicable law to reconcile interests between the parties.

In particular, determining the applicable law is crucial, as it determines how the contract will be interpreted and interpreted, the rights and obligations of the parties, and how any disputes will be resolved. A clearly worded applicable law provides legal certainty to the parties and minimizes the risk of misunderstandings or disputes regarding the interpretation of the contract.

Choice of jurisdiction

The place of jurisdiction determines before the courts of which country any disputes in connection with the contract will be settled. Again, it is important that the parties are in agreement in order to avoid possible uncertainties and conflicts. Jurisdiction can have a significant impact on the course of a dispute, including the costs, course of proceedings, and enforceability of court decisions.

The choice of jurisdiction depends on various factors, including the geographical location of the parties, the nature of the contract, and the legal framework. In some cases, it may be useful to choose a neutral jurisdiction to ensure fair and impartial treatment.

It should be noted that the applicable law may differ from the place of jurisdiction and that the courts of one country may have to apply the law of another country. In this respect, both aspects should always be considered. Just because the applicable law has been determined does not mean that the place of jurisdiction is automatically in the same country.

Result

Specifying the applicable law and venue in contracts of all kinds is crucial to ensure legal certainty and minimize potential disputes. By having a clear and unambiguous agreement in these areas, the parties can avoid conflicts and, in the event of disputes, have a clear legal framework to resolve them. It is advisable to seek assistance from experienced lawyers in drafting and signing contracts to ensure that all legal aspects are adequately considered.

Author:
Dr. Dominic John Patrick Porta, LL.M.
Attorney at Law (Düsseldorf Bar Association n° 52954)
Abogado (ICAIB n° 6645)
dominic.porta@anwaltmallorca.eu
www.anwaltmallorca.eu

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