What it is
A jurisdiction (or 'choice of law / venue') clause specifies which state's law governs the contract and which court hears disputes. Many large companies pick their home state to make litigation expensive for the other side.
Why it matters
Travel costs, local counsel fees, and unfamiliar court rules can make a $50,000 claim cost $150,000 to litigate. The result: you settle for less or never file.
Sample clause language
"This Agreement shall be governed by the laws of Delaware. Any dispute shall be brought exclusively in the state or federal courts located in Wilmington, Delaware."
What it really means: Standard for Delaware-incorporated companies, but unfair if you live across the country. Negotiate for your home state, the defendant's home state, or a neutral forum.
Red flags
- Exclusive jurisdiction in a state you've never been to
- Choice of law that voids consumer protection in your state
- Combined with arbitration clause requiring travel to that state
Fair / acceptable
- Either party's home state
- Neutral state (Delaware acceptable for both businesses)
- Allows online or remote arbitration
How to negotiate
- Ask for your home state
- Or compromise on whichever party is the defendant's home state
- Or strike exclusivity (allow either forum)
Frequently asked questions
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Not legal advice. For informational purposes only.