“This agreement shall be governed by and construed in” is a common phrase found in legal contracts. While it may seem like just another legal jargon, it is actually a very important phrase that outlines the terms and conditions of a contract, and helps to ensure smooth business operations.
The phrase “governed by and construed in” refers to the laws and regulations that apply to a particular contract, and the interpretation of those laws. In essence, it dictates the legal framework under which the contract is to be executed and enforced.
When drafting contracts, it is important to include this phrase to ensure that both parties understand and agree to the legal framework pertaining to the agreement. This is particularly important for contracts that involve international business dealings, where different legal systems may come into play.
For example, if a company based in the United States enters into a contract with a company based in China, it is important to specify which country’s laws will govern the contract and how any disputes will be resolved. This helps to prevent misunderstandings and costly legal battles down the line.
In addition, including this phrase in a contract can also help to establish a clear understanding of the intentions of both parties. By specifying the governing laws and the interpretation of those laws, the parties can ensure that they are on the same page when it comes to the terms and conditions of the agreement.
For instance, let’s say two parties enter into a contract for the lease of an office space. If the contract specifies that it will be governed by the laws of the state where the property is located, and construed in accordance with those laws, then both parties have a clear understanding of their rights and obligations under that state’s legal system.
In conclusion, including the phrase “this agreement shall be governed by and construed in” in contracts is crucial to ensure that both parties understand and agree to the legal framework that applies to the agreement. By specifying the governing laws and the interpretation of those laws, parties can avoid misunderstandings and costly legal battles down the line. It is therefore important to ensure that this phrase is included in all contracts, particularly those that involve international business dealings.