Contract Countdown Series – Most Dangerous Contract Risks #14
Last week in our new ‘Contract Countdown’ series, where we look at the most dangerous risks in your contracts, we showed you how references to out of date legislation can wreak havoc with your business.
This week, coming in at #14 on Contract Countdown is jurisdiction
#14 – JURISDICTION
We really hate the word ‘jurisdiction’. So formal and legalistic and stuffy and fancy – we’re not regular lawyers, we’re cool lawyers! It’s like us saying, “Our practice director, Natalie Ledlin, has jurisdiction of Ledlin Lawyers.” Sorry, come again? Anything plain English and easy to understand for everyone has our thumbs up. Anyway, enough rambling from us (if we ever say “we digress” please eyeroll and slap us).
The jurisdiction clause of a contract simply tells the parties which law applies to the interpretation and use of the contract, and which Court has the authority to make decisions about it and any disputes. The most common type is where a specific State or Territory is nominated.
Now, there’s nothing wrong with nominating a specific State or Territory to govern your T&C’s. It gives welcome clarity to the contract. BUT it might not always be appropriate in terms of location of the parties and costs to run a dispute. For example, if you are a national business with offices and customers all around Australia, then it might not always be cost effective or convenient to run a dispute in a NSW Court. If your head office is located in Sydney, but your Melbourne branch supplied goods to a customer in regional Victoria, then you might want to consider something more practical.
Sometimes we also see jurisdiction clauses that nominate a random, specific Court that might have nothing to do with the parties or their locations (like the Local Court of Wagga Wagga, or something – no offence WW). Or we might see a Queensland registered company selecting a Western Australian law to be governed by. The point is, you should be thinking about the appropriateness and practicality of the applicable law and Courts, and better still, giving your business the choice to decide.
We think it’s best to craft a discretionary jurisdiction clause that allows you to choose which State or Territory laws and Courts apply to your contract, including for dealing with disputes. It can also minimise jurisdiction disputes if your customer threatens to transfer proceedings to another State. The clause can provide a default nomination where no decision is made to keep the clarity that a usual jurisdiction clause provides.
SO DO THIS: Find your jurisdiction clause. If you don’t have one, panic. Just kidding – but contact your lawyer to give you one. If you do have one, circle it and think about how it applies to your business. Is it appropriate? Is it practical? Does it give you discretion? If not, get your lawyer on the line and ask them about a new one.
Look out for next week’s article with our #13 risk!
For more information, contact Holly Jackson