Understanding and preparing for Jurisdictions

Published August 22nd, 2006 edit replace rm!

In my last post Pragmatic contract law for entrepreneurs I covered the basics of contracts.

It was pretty thin though with respects to covering jurisdictions. Jurisdiction basically means, who has the right to decide what happens over a contract in case of a dispute. As I mentioned before the legality of a contract really means the enforceability of a contract. So these are very closely related.

As my last post I need to say that IANAL. I probably should say that this is not intended as legal advice, but that would be another annoying lawyeristic lie. Yes this is intended as legal advice but you must use it at your own risk.

Why you need to think of jurisdiction?

The most important factors of jurisdiction are cost and preparedness. If you feel you need to take things to court then it might cost you a lot of money and take a long time. But then again this can also be a useful threat against another party in a contract.

Also if you are writing a contract as being under the jurisdiction of the state of California you might need to be prepared for different things than if you were under Danish, Spanish or Panamanian law.

This is where formalities may or may not be worth your while. Perhaps in your chosen (or defacto) jurisdiction there is a requirement for a certain format of a contract you might have to follow.

For example in Denmark for renting an apartment there are very strict rules of the form of the contract. Almost everyone uses a form contract you can buy in stationary shops. If you are renting out an apartment in Denmark it might not be a bad idea to use this or you might have big problems during a dispute.

Being prepared in this way does not mean you actually need to go to court in that jurisdiction. It is more like a kind of underlying threat. I am prepared to take this further if you don’t fulfil your part.

In Panama for example for many commercial contracts that you might sign for ISP, mobile etc use they often require a photocopy of your passport with your signed contract. This is just an extra level of threat/evidence they are building on you in case you don’t follow their rules. I doubt that it would actually help anything if they actually did take you to court for non payment.

Efficiency or cost of a legal system may sometimes be important in a less logical way. The slowness of the legal system in some jurisdictions such as Panama is often seen as a benefit for people incorporating there. As it makes it less likely that the company will be sued. Thus other more creative ways of enforcing contract have to be invented.

Which jurisdiction?

For example if you are in California and agree to do the Ruby on Rails development for a startup in Palo Alto you are pretty much by default covered by California jurisdiction if everything goes wrong and you can’t work out a solution yourselves to a dispute. You can’t for example just say we are under Azerbadjani jurisdiction. If you both agree to abide to Azerbadjani law in your contract, you can use their law, but California will trump out in the end in terms of jurisdiction.

Multilevel jurisdictions

While not officially jurisdictions you will often have several other authorities before you go to the legal system of the State of California.

Firstly and most importantly there is the jurisdiction of you. You are the first level of recourse. If you are unhappy you need to decide what you want to do. Almost all legal cases get heard in the court of your head first. Remember the other party to your contract also does the same.

Secondly there is the jurisdiction of talking it out. This should not be discounted. Both parties can really save a lot of problems and cost if you work it out between yourselves.

As I mentioned in the last article. If you sell your collection of 8" 5G hard drives on EBay, you are pretty much under the jurisdiction of EBay. If you are unhappy with EBay’s dispute resolution talents you can take it further, but practically speaking very few people do.

This is also true when you pay online with your credit card, the transaction is generally speaking under the jurisdiction of VISA or Mastercard. If you have a dispute you will contact first the merchant with the threat of doing a chargeback with your bank. The merchant fears chargebacks as they increase his cost of doing business, so he will in most cases do what you want.

If not you take it to the “courts” of your Visa through your Issuing bank (Your lawyer) who presents your case against a case presented buy the Merchants bank. Somehow (I haven’t studied this well) VISA makes a decision. This decision is final unless you of course appeal it up to another jurisdiction such as your state or government consumer affairs ombudsmand. This can yet again be bumped up to another jurisdiction, such as the courts of California. Eventually it might be bumped out of the state courts and into the federal system.

Lawyers letters

The above bit actually leaves out an important part about the part of lawyers. Lawyers however much we don’t like them are actually there to keep us out of court.

Many people hire lawyers to write threatening scary letters to the other parties in a dispute (No, really, they do do other stuff than send out DMCA cease and desist letters). These and ensuing negotiations are the final step before going to court. You may receive a threatening letter from a lawyer, but it doesn’t necessarily mean that he will take you to court. Think of it as an expensive way of bluffing your way through a game of poker.

If you are up against a large client for example, lawyers may be your only course of action. Just hope they don’t call your bluff and say lets go to court.


These above examples are pretty simple and have a pretty straightforward upward path, but what happen if there are several competing jurisdictions at the same time?

For example who has jurisdiction if you are in California and working a contract for a client in Oregon?

This is way more complicated. Normally your contract will be written by the client and states that the jurisdiction is the state of Oregon. However I am not quite sure that this is a simple as it sounds. In almost all such cases you are better off working it out between yourselves if you have a dispute due to the higher costs you might have in contracting a lawyer away from your home area.

Jurisdiction in international cases

If you are a web developer in Argentina and working for a client in the US under which jurisdiction is the contract? This is one of those really complex issues that in fact is fairly simple as long as the contract amount is not a huge amount (no, I wont define huge).

The party of the contract who has the upper hand is the jurisdiction.

However unfair this is, this is the fact of international business on the personal level at the moment. If the US client decides not to pay, there really is not much the Argentinian web developer can practically do. On the other hand if the contract specifies that the US client makes a down payment then it evens out a bit. But this is not really the way things are done.

Of course you do have the option of using services like Elance and Rentacoder which provide their own Ebay like jurisdiction. As in EBay and with any other jurisdiction you need to prepare your contract using the tools that they provide. These services as a whole even out the whole upper hand bit.

If we are talking about “huge” amounts of money they you need to worry about the jurisdictions of residence of both parties to the contract. If there is a dispute you will most likely have to take care of it in the other parties jurisdiction. But this almost certainly out of the scope of this contract.


The real message is to understand what the jurisdictions are that you are working under. You need to remember everything I said before about contracts and remember that the most important jurisdictions for any contract are you and the other party. Then you need to think about if it would ever be worth while for you or the other party to go to another jurisdiction. If it might be you need to prepare yourself. Next I will cover Identity.


Brian@attorneys letter October 3rd, 2011

jurisdiction is one of the essential part of different business organization as well as for the public.It give quick as easy solution for the problems.You can save your time and money by this method.For this purposes you need to find some expert law professionals who solve the matters easily.

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