I don’t need to tell you that New York lies at the center of the universe. But did you know that you can be a part of it by choosing New York law to govern your business contracts and New York courts to decide upon any conflicts arising from your business contracts, even if the transaction, you, or the other party to the contract have no relation to New York?
Choosing New York law and New York courts may be desirable, because
- you and the other contract party are from different states or countries and you wish to agree on a neutral law and a neutral place for dispute resolution; or
- you wish to take advantage of New York law and New York courts which are known to address the most complex financial and commercial transactions.
Choosing New York Law
You can choose New York law to govern your contract – whether or not the contract has any relation to New York – if your contract provides for consideration of at least $250,000. (General Obligations Law Section 5 1401).
How do you choose New York law to govern your contract? You agree to it with your contract partner by including a provision in your contract similar to this one:
This Contract shall be governed by and construed in accordance with the laws of the State of New York.
Some lawyers add “without regard to New York’s choice of law statutes” or something similar, but I believe that is unnecessary.
Choosing New York courts
Now, in order to ensure that your choice of law provision will be enforced when you find yourself in court over the contract, you are well-advised to choose New York courts in addition to New York law. If you have chosen New York law in your contract and your contract relates to an obligation of at least $1,000,000, you can have New York courts decide upon your contract disputes. New York General Obligations Law Section 5 1402 provides that you can sue a foreign corporation or non-resident where the dispute arises out of a contract for which a choice of New York law has been made and which is a contract with consideration covering at least one million dollars.
How do you choose New York courts? You agree to it with your contract partner by including a provision in your contract similar to this one:
Each of the parties to this Contract hereby irrevocably consents and agrees that any legal action, suit or proceeding with respect to this Contract may* be brought in a federal or state court located in [_______, New York], and each of them hereby irrevocably accepts and submits to the jurisdiction of such courts with respect to any such action, suit or proceeding.
*Note that this provision makes the selection of New York courts optional. You could also agree that the selection of New York courts is mandatory. In that case it would read “must be brought exclusively in a federal or state court located in…”.
Consider Consenting to Special Service
If both parties are not present in New York, it is advisable to agree in advance what constitutes service for the purpose of starting a lawsuit in New York courts. For this reason, you could agree to a provision similar to this one:
Each of the parties to the Contract hereby irrevocably designates, appoints and empowers [insert name and address of an agent in New York], as its authorized agent to receive for and on its behalf service of summons or other legal process in any action, suit or proceeding in the State of New York. Each of the parties to the Contract further irrevocably consents to the service of process out of any New York court by mailing copies thereof by registered United States air mail postage prepaid to each of the parties of the Contract at its address specified in this Contract.
Don’t hesitate to contact me if you have any questions about this topic.