Determines which jurisdiction's laws apply to interpret and enforce the NDA, affecting everything from contract interpretation to available remedies.
⚠ Medium Risk
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Plain English Explanation
A governing law clause specifies which jurisdiction's laws will be used to interpret the NDA and resolve any disputes. This matters because different states and countries have different rules about contracts, trade secrets, and remedies.
This is different from the "venue" or "forum" clause, which determines where disputes will be heard. You could have an NDA governed by Delaware law but litigated in New York courts - the New York court would apply Delaware law.
Key considerations include:
Trade Secret Laws: Different jurisdictions have different trade secret protections. Some have adopted the Uniform Trade Secrets Act (UTSA), others have their own frameworks.
Restrictive Covenant Enforcement: Non-compete and non-solicitation provisions are enforced very differently. California famously refuses to enforce most non-competes.
Contract Interpretation: How ambiguous terms are interpreted, what remedies are available, and procedural rules all vary by jurisdiction.
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Why This Clause Matters
Substantive Rights: The governing law affects what rights you actually have. Some jurisdictions are more protective of trade secrets or more willing to grant injunctions.
Predictability: If you know the governing law, you can structure your behavior accordingly. Uncertainty about applicable law creates compliance risk.
Local Counsel: You may need lawyers familiar with the governing law, even if you never actually litigate there.
Non-Compete Validity: If the NDA includes non-solicitation or non-compete provisions, the governing law will likely determine their enforceability.
Statute of Limitations: Different jurisdictions have different time limits for bringing claims. This can be critical for trade secret claims.
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Risk Factors
Unfamiliar Jurisdiction: If governed by laws you don't know, you may not fully understand your rights and obligations. This is especially true for international agreements.
Trade Secret Treatment: Some jurisdictions define trade secrets narrowly or require specific protections to qualify. Know whether your information qualifies under the chosen law.
Conflict of Laws: Sometimes the stated governing law conflicts with mandatory rules of another jurisdiction (e.g., your home country). The clause may not be fully enforceable.
Forum Connection: Courts sometimes refuse to apply a governing law with no reasonable connection to the parties or transaction.
Restrictive Covenant Rules: California, North Dakota, Montana, and Oklahoma heavily restrict non-competes. If employees are in these states, those rules may apply regardless of governing law.
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Clause Versions
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of laws principles that would require the application of the laws of any other jurisdiction.
Both parties agree that the State of Delaware has a reasonable relationship to this Agreement given its well-developed body of corporate and commercial law.
Notwithstanding the foregoing:
(a) Questions regarding the validity, protection, and enforcement of trade secrets shall be governed by the Defend Trade Secrets Act of 2016 (DTSA) to the extent applicable, and the trade secret laws of the jurisdiction where the relevant trade secret originated;
(b) The enforceability of any non-solicitation or non-competition provisions against an individual shall be governed by the laws of the state in which such individual is principally employed; and
(c) Nothing in this clause shall prevent either party from seeking injunctive or other equitable relief in any jurisdiction where such relief may be available.
Each party consents to the personal jurisdiction of the state and federal courts located in Delaware for any action arising out of or relating to this Agreement.
Note: This balanced version chooses a neutral, well-developed jurisdiction (Delaware) while carving out specific issues that may require different governing law, such as employee restrictive covenants.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of [Your State], without regard to its conflict of laws principles.
The parties agree that any dispute arising under or relating to this Agreement shall be resolved by the state or federal courts located in [Your County, Your State], and each party hereby consents to the exclusive jurisdiction and venue of such courts.
Each party irrevocably waives:
(a) Any objection to the laying of venue in the courts of [Your State];
(b) Any claim that an action or proceeding brought in such courts has been brought in an inconvenient forum; and
(c) The right to a jury trial in any action arising under or relating to this Agreement.
Notwithstanding the foregoing, either party may seek provisional or injunctive relief in any court of competent jurisdiction as may be necessary to protect such party's rights pending final resolution of any dispute.
Each party agrees to bear its own costs and attorneys' fees in connection with any dispute, except that the prevailing party in any action to enforce this Agreement shall be entitled to recover its reasonable attorneys' fees and costs from the non-prevailing party.
Why this favors you: Uses your home jurisdiction's laws and courts, exclusive venue in your location, jury trial waiver (favors the party with more legal resources), and fee-shifting for enforcement actions.
Governing Law and Jurisdiction
This Agreement shall be governed exclusively by and construed in accordance with the laws of [Their State/Country], without regard to its conflict of laws principles, and irrespective of the location of either party's principal place of business or the location where this Agreement is signed or performed.
Each party irrevocably:
(a) Submits to the exclusive jurisdiction of the courts of [Their State/Country] for all purposes relating to this Agreement;
(b) Waives any objection to such jurisdiction or venue, including any objection based on forum non conveniens;
(c) Agrees that all disputes shall be resolved exclusively in the courts of [Their City/Country], with no right to remove or transfer proceedings;
(d) Waives any right to a jury trial;
(e) Agrees that service of process may be effected by registered mail to the address set forth herein, with service deemed complete five (5) days after mailing; and
(f) Agrees that the laws of [Their State/Country] shall apply to all questions regarding trade secret protection, restrictive covenant enforceability, and all other matters, regardless of where any Confidential Information is located, where any party is located, or where any alleged breach occurs.
Any judgment obtained in [Their State/Country] shall be enforceable in any jurisdiction where the other party has assets or conducts business.
Warning - One-sided: Requires you to litigate in their jurisdiction, waives all venue objections, applies their law to all issues including trade secrets and employee restrictions, and allows them to enforce judgments anywhere. Creates significant practical barriers to enforcement and defense.
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Negotiation Tips
1
Choose a Familiar Jurisdiction: If possible, negotiate for the laws of a jurisdiction where you have legal counsel and understand the legal landscape. Home court advantage matters.
2
Consider Neutral Ground: Delaware and New York are common choices for commercial agreements because they have well-developed business law. Neutral jurisdictions can facilitate agreement.
3
Carve Out Employee Issues: Non-solicitation and non-compete provisions should be governed by where employees work, as many jurisdictions have mandatory rules that override contractual choice of law.
4
Preserve Injunctive Relief Rights: Regardless of the general governing law, ensure you can seek emergency injunctive relief wherever it's needed (where the breach is occurring).
5
Know the Trade Secret Rules: Before agreeing to a governing law, understand how that jurisdiction defines and protects trade secrets. The DTSA provides a federal baseline, but state laws vary.
6
Consider Practical Enforcement: A favorable governing law is useless if you can't practically enforce judgments. Consider where the other party has assets.