Monday, September 21, 2015 By Tilly Gray
A governing law clause. specifies that the laws of a particular jurisdiction will govern the interpretation, construction, and enforcement of the terms of the contract. The parties to a contract mutually agree upon the governing law to create certainty. It allows them to analyse their legal position with confidence and also informs a court, should a dispute arise, of the law that the parties intended to apply to their contractual relationship.
We recommend you consider the following:
 The governing law clause in our firm’s Boilerplate Agreement is as follows: The laws of [Ontario/British Columbia] and the laws of Canada applicable in that province, excluding any rule or principle of conflicts of law that may provide otherwise, govern this agreement.
 In Imperial Life Assurance Co of Canada v Segundo Casteleiro Y Colmenares, the courts took into consideration factors such as the place where the contract was drafted and the place where the applications for life insurance were made in determining what the governing law should be.
 For example, if the laws of a particular jurisdiction are chosen to avoid the laws of another jurisdiction or the parties and the subject matter of the agreement have no connection to the chosen jurisdiction. This issue was discussed in length in the leading case of Vita Food Products Inc v Unus Shipping Co Ltd where the courts held that an express choice of law clause in a contract should be honoured as long as the agreement was bona fide and not against public policy. This judgment established the test for the recognition by Canadian courts of a choice of law clause.
 For example, if a dispute is being heard by an Ontario court, and the governing law is different than Ontario law, then the governing law will need to be proved as a fact through evidence from persons who are experts in the governing law. This has the effect of increasing the length and cost of the litigation proceeding.