Because of technology, many South Dakota businesses can serve clients and customers all over the world. It's no longer necessary to restrict your market to a specific geographic area. While this is great when it comes to growing your business, it could present you with problems if you are involved in a lawsuit for two primary reasons - governing law and jurisdiction.
Let’s say you have a South Dakota ice manufacturing business. You have clients in the state, but you also serve clients in Iowa and Nebraska. You have signed contracts with your clients, using a standard contract form you downloaded from the Internet. You’ve had no issues with this contract - until you decide to sue an Iowa client for non-payment.
Where do you file the lawsuit? In South Dakota or Iowa? If your standard contract doesn't include a "governing law" provision that clearly states which state’s law applies to the contract, things have potentially gotten complicated.
Similar to governing law, a jurisdiction provision specifies which state controls the contract. Jurisdiction also specifies which courts have control over the lawsuit.
If you live in South Dakota, you probably don’t want to have to hire an attorney in Iowa to prosecute your claim. Having a provision in your contract stating that South Dakota has jurisdiction over any contractual issues will help reduce the cost and inconvenience of pursuing your claim. A jurisdiction provision can also specify which county in South Dakota has control over your claim.
Why It's Important
Having "governing law" and "jurisdiction" provisions in your contract can make all the difference in whether you will be able to enforce your contract in South Dakota. Unfortunately, not having these provisions could mean that you have to pursue your non-paying customer in another state. Another advantage is that if your contract favors you in South Dakota, your client will be more likely to pay, since they may not want to have to defend your lawsuit in South Dakota. It will also be less expensive for you to pursue your claim.