Legal Question in Business Law in California

Is there an advantage to establishing the state of CA verses AZ to govern a contract.

Asked on 4/15/13, 2:46 pm

2 Answers from Attorneys

Jim Betinol Withrow and Betinol Law

First, I want to let you know that I am not an Arizona attorney, but instead an attorney licensed to practice only in California.

It is difficult to provide you guidance on this question as I do not know what type of contract you are working on and what sort of terms are within that contract. California and Arizona do have different laws that apply to contracts that can lead to very different outcomes depending on the nature of your contract. I would recommend that you consult with an attorney to review your contract.

Example: California law provides for specific protections with regards to inventions assignment for employees, which I do not believe exists in Arizona Law.

Another Example: California law have strict anti non-competition clause. I believe Arizona's laws on anti non-competition clause allows for more flexibility.

Kind regards,

Jim Betinol

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Answered on 4/15/13, 3:01 pm

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Contracts frequently specify two things with regard to various states: (1) where jurisdiction of lawsuits will be; and (2) whose law will be applied.

Usually, it's the same state, but I've seen instances where Arkansas courts are trying to figure out and apply Texas law to a lawsuit brought in their courts. So, keep in mind that there are at least two kinds of "govern" possible: jurisdiction of lawsuits and choice of governing law.

Having said that, I'd gp on to say that in 99.9% of contracts it's better to have the governing law be of the same state that will have jurisdiction of lawsuits. Beyond that, I'd note that the contract party who writes the contract (if any does so exclusively or almost so) will usually dictate the state that'll have jurisdiction and whose law will apply.

If the contracting parties are of relatively equal negotiating strength, the choice of jurisdiction and of governing law should be made based upon practical considerations, primarily those of cost and convenience. If the contract involves a California contracting company bidding on a construction job in Arizona, for example, chances are that suits should be heard by Arizona courts applying Arizona law, because that's where the contract is being carried out and will probably be the place where breaches may occur.

The same kind of reasoning could be applied in reverse, or to other types of contracts. Just ask yourself, "Where will the facts of a possible lawsuit arise?"

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Answered on 4/15/13, 8:27 pm

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