Jurisdiction means the geographic area over which authority extends; legal authority; the authority to hear and determine causes of action. Jurisdiction generally describes any authority over a certain area or certain persons.
A governing law clause expressly sets out the choice of law which applies to the contract, eliminating the need for any preliminary arguments about which country’s laws should be used when interpreting the contract.
Predominantly, cross-border contracts can involve multiple businesses that operate in entirely different legal systems. Not only might the primary contracting parties be based in two different countries but the performance of the contract could take place in a third country. This makes it all the more important to decide under which legal system the contract is governed.
These clauses should usually be included in the agreement in order for the parties to decide, in case of any dispute arising thereof, where the issue will be brought for resolution and the law which will govern the matter. If there is no effective jurisdiction and governing law clauses in the contract the correct forum for the determination of a dispute and applicability of the law will be decided by reference to rules of private international law, which may cause uncertainty and inconvenience and can lead to additional costs and delay in the progress of dispute settlement.
Before entering into any contract it is advisable to seek the legal expert on how your rights and interest will be properly protected or safeguarded. A small slip-up in making or drafting a contract may cause you a lot.