Many construction contracts contain clauses that designate the law of another state as the governing law for the contract.  It is not uncommon for a construction project and a subcontractor to be located in one state and for an out-of-state general contractor to insist on using its form contract which includes a clause designating the general contractor's state law as controlling the terms of the contract.  Parties to the agreement must be familiar with the law of the jurisdiction designated as controlling in order to fully understand the terms of the contract.

Here is an example of why being aware of this issue is important.  In New York, "Pay-if-Paid" clauses are not enforcable.  However, in a recent New York case, the highest New York court held that "Pay-if-Paid" clause are enforceable in New York when applying out-of-state law under a contract which designated the law of another state as controlling.  Of course, the controlling law of the state designated by the contract must permit "Pay-if-Paid" clauses.  It requires very little imagination to understand how devestating failing to appeciate this term in a contract could be.

Remember to ALWAYS check the laws of the jurisdiction controlling your contract. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.