The governing law clause in a non-disclosure agreement (NDA) under the United States law

Standard Position

In US NDAs, the governing law clause typically designates a single US state's law rather than federal law alone. The most common choices are Delaware, New York, California, and the state where one party is headquartered. Delaware is popular for its well-developed commercial law and specialized Chancery Court; New York attracts parties seeking predictable contract interpretation; California is chosen when dealing with West Coast technology or entertainment parties. The clause usually reads as a straightforward election: "This Agreement shall be governed by and construed in accordance with the laws of [State], without regard to its conflict of law principles."

Legal Basis

The enforceability of governing law clauses in US NDAs rests on common law contract principles and the Uniform Commercial Code (UCC), where applicable. Under the Restatement (Second) of Conflict of Laws, parties have broad freedom to select governing law if they have a reasonable relationship to the chosen state or if selection is not manifestly unreasonable. Most US states have adopted the Uniform Law Commission's Uniform Computer Information Transactions Act (UCITA) or follow similar principles allowing contractual choice of law. The "without regard to conflict of law principles" language prevents the chosen state's courts from applying another state's substantive law, ensuring predictability. However, courts will not enforce a governing law clause if it conflicts with a state's fundamental public policy or mandatory consumer protection statutes.

Drafting and Negotiation

When negotiating the governing law clause, consider: (1) whether either party has principal operations in a specific state, making that state's law relevant; (2) whether you prefer a state with developed case law on NDAs and trade secrets (Delaware and New York excel here); (3) whether any party is a consumer, which may trigger mandatory consumer protection laws that cannot be waived; and (4) the interaction between governing law and venue/jurisdiction clauses. A common compromise when parties are in different states is to select a neutral state like New York or Delaware. Separately, decide whether to include a "waiver of jury trial" and an "exclusive jurisdiction" clause naming specific courts, which work alongside the governing law clause but are distinct. Avoid vague language like "applicable law" without naming a state, as courts will apply conflict of law rules to determine which state's law governs.

Common Pitfalls

Frequent mistakes include: (1) leaving the governing law clause blank or using multiple state references without clarity on which applies to which provisions; (2) selecting a state where neither party has contacts, which courts may find unreasonable if challenged; (3) failing to coordinate the governing law clause with separate venue and jurisdiction clauses, leading to enforcement confusion; (4) assuming federal law (such as the Defend Trade Secrets Act) automatically governs, when state law typically addresses NDA enforceability and remedies; (5) using outdated conflict of laws language that modern courts may disregard; and (6) ignoring that some states (notably California) have strong public policy against non-compete clauses, which can affect broader NDA enforceability even when another state's law is chosen.

Sample language

This Agreement shall be governed by and construed in accordance with the laws of the State of [State], without regard to its conflict of law principles. The parties consent to the exclusive jurisdiction and venue of the state and federal courts located in [County/City], [State] for any disputes arising from or relating to this Agreement.

This is general drafting guidance, not legal advice, and not a substitute for advice on your specific facts and jurisdiction. Sample language is a starting point to adapt, not a finished clause.