NC Choice of Law and Forum in Business Contracts

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The North Carolina General Assembly has decided to legislate choice of law in commercial transactions.  It will be codified at N.C. Gen. Stat. §1G-1. The statute only applies to business contracts. The definition in the statute excludes consumer contracts and employment contracts. The statute says is when it becomes law and applies to business contracts entered into before, on, or after that date.

The benefit of this statute is that that parties they can choose North Carolina law to govern their contracts and they can select North Carolina as a forum to resolve their disputes. Before the statute was enacted an opposing party could attack choice of law in court by saying that the dispute did not have a “reasonable relation” to North Carolina or application of our law would violate a “fundamental policy” of the state whose law would apply in the absence of the choice of law provision.

Now, those attacks are not allowed under the statute. If the parties to a business contract agree that North Carolina law will govern their relationship, it may not be attached on reasonable relation or fundamental policy grounds.

The new law also allows parties to a contract to choose whether they want disputes litigated in North Carolina. Before, parties could attack forum clauses on the basis of substantial hardship or unequal bargaining power.

Finally, the new law also gives parties to business contracts the ability to select a specific North Carolina county in the contract as the place where any lawsuit relating to the contract must be filed.

For help with employment law questions or other civil litigation issues, call Tracy Stroud, Attorney with Colombo Kitchin Attorneys in Greenville, NC, at 252-321-2020.