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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

Delmar Inc and Esker GmbH agree that 'the courts of Country P shall have exclusive jurisdiction over any dispute'. The contract is silent on governing law. Esker later sues Delmar in Country Q, where Delmar has assets. Which statement is most accurate?

A jurisdiction clause selects where disputes are heard, not automatically which law governs. The governing law is determined by the court's conflict of laws rules unless the parties chose it. Courts can be chosen by contract, and omitting a governing law clause does not invalidate the agreement.

  1. AA jurisdiction clause chooses the court that hears disputes; it does not by itself fix the governing law, which the court decides using its conflict rulesCorrect
  2. BThe jurisdiction clause automatically makes the law of Country P the governing law in every circumstance
  3. CThe jurisdiction clause is meaningless because courts cannot be chosen by contract
  4. DThe jurisdiction clause makes the contract unenforceable because governing law was omitted

Explanation

Choice of forum and choice of governing law are separate issues. Courts often apply their own law when they are the chosen forum, but this is not automatic in every circumstance. Parties can choose courts by contract, and silence on governing law does not make the contract unenforceable.

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