Applicable law & jurisdiction
It is usual to determine the applicable law and the jurisdiction in contracts. This defines which law applies to the interpretation of the contract and to any dispute arising out of or in connection with it and where such disputes would have to be settled.
If nothing is provided, default rules will apply to determine applicable law and jurisdiction. If a contract is concluded between two Swiss companies, Swiss law will generally apply.
The applicable law is relevant for two reasons:
- Each law has mandatory rules that apply irrespectively to what is agreed by the parties. If foreign law applies to your contract, you're subjecting yourself to these mandatory rules that you may not know.
- The interpretation of a contract depends on the applicable law. For example, under Swiss law, in case of unclarity of the contract, the judge will strive to interpret and apply the true and initial agreement of the parties; this may not be the case under a foreign law where the judge may simply apply what they understand.
Best practices
Applicable law: It is specified which law applies to the agreement. Opt for your 'home law' where possible
Jurisdiction: Opt for your ‘home courts’ where possible.
Clause: The following clause is used: "This Agreement is governed by substantive Swiss law (excl. CISG) and subject to the exclusive jurisdiction of the ordinary courts of [Zurich], Switzerland. ""
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