I am considering hiring a firm in India for a website development and am in the process of drafting the agreement. I am located in Australia.
Standard agreements include a clause stating which country and state the agreement is governed (the 'Governing Law' clause).
My preference is to have the agreement governed in Australia, the developers' preference is India. Should I make the governing jurisdictions both countries? And what is normally done in similar circumstances?
Thanks in advance - Trish
The governing jurisdiction determines what set of laws and case law is used to interpret the contract, and what court system you will use if you need to litigate.
Having both countries as the governing jurisdiction won't work. If there's a difference between the two countries about the way a contract clause is interpreted, which gets used? And if you have to sue each other, which country do you do it in? It really only works to pick one jurisdiction.
Here's a simple example from the US: employee non-compete agreements, which are contracts where an employee agrees not to work for their employer's competitors for some period of time. They are commonly enforced in Florida, and completely unenforceable in California. You could easily find that kind of difference between India and Australia.
Of course you both want your country to have jurisdiction. You're each more familiar with your own laws, and it's a lot easier to go to court in your own country.
Usually the golden rule applies to court jurisdiction: you're paying the gold, so you make the rules. If I were you, I'd insist on Australia and walk away if they won't agree.
International litigation is horrendous. If the Indian outsourcing firm flakes out on you, how will you enforce the contract? If you win a suit against them in Australia, how are you going to enforce it? Do they have assets in Australia that can be seized? You can't count on the fear of litigation to keep a foreign supplier in line the way you might with a domestic supplier.
I really suggest you consult with a competent international law attorney around this, because as you can tell, it can be a can of worms. You might also want to consider some kind of third-party escrow, so you pay money in advance to the escrow service, and the outsourcing firm gets paid as specific milestones are met.
Several thoughts based on my experience in similar matters:
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
Thanks everyone. Based on your collective answers, I'll make the Australia the governing jurisdiction, I'm sure the service provider will be fine with it. And I completely agree - it is highly unlikely that legal action will ever be worth the hassle or expense, plus this initial project isn't going to have enough in it for that anyway.