How to create a governing law clause for your ToS agreement
If your company services customers across borders, you face various regulatory requirements, some of which may even be contradictory. Including a governing law clause in the Terms of Service (ToS) agreement on your website will clarify which jurisdiction’s rules apply to your organization and help prevent confusion.
While this clause doesn’t fully protect you from legal challenges, it serves as an anchor for your ToS, along with other agreements and disclaimers. It clarifies your rights and responsibilities under the law, gives you solid ground to enforce the rules of your contract with customers, and leaves less room for uncertainty should disputes arise.
This guide covers what a governing law clause should include, why it matters, and how to draft one that protects your organization.
At a glance
- A governing law clause establishes which jurisdiction’s laws apply to your Terms of Service so there is a single, consistent legal framework to follow in case of disputes.
- The clause clarifies everyone’s rights and responsibilities, reducing ambiguity and strengthening your ability to enforce contractual terms across regions.
- This clause is important for cross-border operations but cannot override mandatory extraterritorial laws, which apply independently of contracts.
- When drafting the clause, use clear language, avoid ambiguity, include carve-outs for mandatory privacy laws, and seek legal review for accuracy and validity.
- Pairing a strong governing law clause with a broader compliance strategy and tools like those from Usercentrics helps reduce legal risk and support multi-regulation compliance.
What is a governing law clause in a ToS agreement?
A governing law clause specifies which state or national laws apply to your Terms of Service agreement. By tying the agreement to a particular jurisdiction, it determines how the parties involved in a dispute should interpret its terms.
Establishing governing law is especially important for any organization with users in different regions that have distinct legal standards. If you don’t specify the laws that apply to your business operations, your terms may be interpreted inconsistently among the parties in a legal dispute.
Many companies include a governing law clause in their ToS, but you can also find this clause in a Terms and Conditions agreement or End User License Agreement (EULA).
A governing law clause should not be confused with a jurisdiction clause. While they serve similar purposes, a governing law clause states which laws apply, and a jurisdiction clause specifies the location of the courts where a legal dispute would be heard.
Why is a governing law clause important?
A governing law clause dictates that all parties follow a single legal framework, even if they’re in different regions with distinct requirements. It clarifies everyone’s rights and responsibilities under your company’s ToS and helps to ensure there’s only one way to interpret your contract.
Including a governing law clause in your agreement strengthens your liability control because all parties involved understand which legal standards apply to your business. You establish what customers can expect of you, what obligations users have, and which regulations guide your approach to legal and privacy compliance.
If a user takes legal action against your company, this clause also helps to prevent confusion around your business’s legal compliance obligations.
Be aware that a governing law clause doesn’t override certain mandatory requirements of extraterritorial laws. Other regulations may apply even if they conflict with the terms of the legal framework you’ve specified in your agreement.
Data privacy laws are a prime example, since they often extend beyond national borders. For example, regardless of any governing law clause, a U.S.-based company is still subject to the European Union’s General Data Protection Regulation (GDPR) if it has customers located in the EU. The regulation’s jurisdiction is based on where data subjects are located, not your business headquarters or governing law clause.
How to choose the right governing law for your business
Choosing a governing law may seem straightforward. You may assume that the best choice is to default to the jurisdiction where your business is registered. But when you operate across borders, other variables can make this decision more complex.
Here’s what to consider when choosing the right governing law for your Terms of Service agreement.
- Business location: If you have very few users abroad, choosing the country where your organization is incorporated can simplify risk management.
- User base: Choosing the region where your primary market is established can mean less resistance when enforcing terms.
- Customer expectations: If your target market is primarily based in a country with robust consumer rights, consider adopting this governing law to reduce potential disputes.
Best practices for writing a governing law clause for your ToS agreement
The following tips can help you draft a governing clause that’s straightforward and accessible to users and easy to enforce across jurisdictions.
1. Use clear and simple language
State the governing law in simple, direct terms so users can more easily understand which legal system applies. Include this information at the start of the section, potentially in bold text to make it stand out.
Throughout the section, use standard phrasing to explain what the clause means. Avoid complex terminology or overly stylized wording that customers without legal backgrounds are unlikely to know.
The Usercentrics Terms and Conditions clearly states which jurisdiction’s laws apply to its business operations: “These Terms are governed by the laws of Germany, excluding its conflict of laws principles.”
2. Avoid ambiguity
Be explicit about what your governing law clause covers so there are no gaps in your terms. Typically, the clause governs your full ToS, any supplemental clauses, and any disputes that may arise from the use of your service.
As you state this information, avoid any language that could be interpreted multiple ways. For example, stick to using ‘disputes’ to describe formal complaints and claims. “Disagreements” might sound softer and fit your tone of voice better, but it adds ambiguity to your agreement that could expose you to legal risks.
Example: The Usercentrics governing law clause clearly states that “exclusive jurisdiction for any disputes lies with the courts in Munich, Germany.”
3. Include carve-outs for mandatory privacy laws
Include a short line clarifying that your governing law clause doesn’t override laws that apply independently of the contract. This way you won’t give the impression that your agreement can replace statutory obligations.
Transparency is essential both for maintaining user trust and cross-border compliance. Under the GDPR, for example, you must obtain users’ informed consent before you process their personal information. If your ToS misleads readers about their rights, aspects of the contract related to data processing may be invalid, and you might be in violation of EU law.
Example: If you’re a US-based company with customers located in Europe, your company has to comply with GDPR requirements. Explain that EU-based data subjects are able to exercise their data privacy rights, even if your governing law clause ties your organization to U.S. law.
4. Consult legal counsel
If you lack the internal expertise, ask an external contract lawyer to review your governing law clause. They should be able to verify that it’s enforceable and mitigates risks to your business.
A contract lawyer can highlight potential conflicts with mandatory requirements. They can indicate when you need to change your governing law, where you may need to rephrase your agreement, or advise you on how to fill compliance gaps.
Example: An Australia-based company that processes the data of a large number of California residents should check with an experienced lawyer to decide how to approach mentioning California Consumer Privacy Act (CCPA) compliance obligations.
Example of an effective governing law clause
Review examples of governing law clauses to better understand what an effective one should look like. Just avoid copying anything word for word; terms must reflect your organization’s unique structure and operations.
Here’s one example of an effective clause to give you an idea of where to start.
Our Terms of Service are governed by the laws of the State of Illinois in the United States. These laws govern the interpretation, validity, and enforcement of this agreement and provide the legal framework for determining your rights and responsibilities as a user.
The laws of the State of Illinois apply to our entire Terms of Service, including any supplemental policies referenced here. They also apply to any disputes arising from your access to or use of our services, unless a separate written agreement states otherwise.
Nothing in this Terms of Service overrides mandatory protections. Data privacy laws, consumer protection rules, and other statutory obligations continue to apply according to their own scope, regardless of the governing law specified in our terms.
By continuing to use our service, you agree to the governing law described in this section.
For inspiration on how to write the rest of your agreement, you can download and customize our Terms of Service template.
Achieve multi-regulation compliance and protect your business
A governing law clause reinforces your Terms of Service by giving the agreement a clear legal basis. With this clause in place, you gain more confidence as you expand into new markets because you know how the courts will interpret your agreement should any legal issues arise.
But you can’t rely on the governing law clause to resolve every dispute. You need a broader legal and data privacy compliance strategy to stay updated with international laws and consistently meet global standards.
Usercentrics can help you stay compliant as privacy requirements evolve. The platform’s solutions enable you to update your privacy notices and consent banners automatically, and geolocation features control data processing so it limits data processing (where legally required) until you have obtained the consent required in a visitor’s jurisdiction.
By combining a strong ToS agreement with Usercentrics automated privacy compliance solutions, you can significantly reduce your legal risk, protect your organization, and build a business that customers trust.