With the increase in ecommerce sites, it is easier than ever to provide goods and services remotely, including to customers living in different States or countries. This month, we will be considering how best to structure a contract for the provision of goods and services to provide for dispute resolution in a particular place.
‘Governing Law and Jurisdiction’ clause in your Terms of Business
If you sell goods or services within and around Australia, it is a good idea to include a ‘Governing Law and Jurisdiction’ clause in your Terms of Business. In the event of a dispute, this clause nominates the jurisdiction in which the dispute will be heard and the law that will be applied. In most cases, the law applied will be the same as the law of the jurisdiction. Jurisdiction clauses may be ‘exclusive’ (in which the nominated jurisdiction is the only place where the action can be brought) or ‘non-exclusive’ (where the parties are also able to bring proceedings in other jurisdictions). In the vast majority of situations, an exclusive jurisdiction clause is preferred due to the certainty it provides.
Generally, the governing law and jurisdiction will be where you are located. For example, if you live in Sydney, you can nominate the jurisdiction to be the courts of NSW and the governing law to be the law of NSW. This gives you a ‘home town advantage’, and reduces costs associated with having to defend a case in another State.
If another party commences action against you in a jurisdiction that is not nominated in the jurisdiction clause, you may apply to the court in that jurisdiction to have the matter stayed (i.e. paused) and have the action instead brought in the nominated jurisdiction.
Whilst you may nominate a particular court or State law that will govern the contract, it is important to remember that Commonwealth laws will also apply to the provision of goods and services. The Australian Consumer Law, contained in the Competition and Consumer Act 2010 will apply to all consumer contracts, regardless of the jurisdiction or law nominated to govern the dispute. State laws will co-exist with the Commonwealth law to the extent that they are not inconsistent, and in the case of any inconsistency, the Commonwealth law is to be applied. Therefore, it should be noted that any contract for the provision of goods and services should be drafted to comply with Commonwealth laws in addition to the laws of the State under which the contract is governed.
If you are considering expanding your business overseas, Governing Law and Jurisdiction clauses can also be used to nominate the law and jurisdiction that will be used in the event of a contractual dispute.