INTRODUCTION
The following fact pattern will serve as a basis for illustrating some of the practical
issues that arise regarding governing law and dispute resolution.
A German company produces and sells machines to a New York corporation. The German
company uses an affiliate in the United States through which to pass the contract. The
contract is in English. On the request of the purchaser, a clause is inserted in the
agreement that the laws of the State of New York are applicable and that any dispute will
be decided by the New York courts.
The machine is delivered but, before handing over the product to the customer, it is to
undergo a testing period. The complex machinery is controlled by special computer
software. Unfortunately, during the testing period, an explosion occurs. The damage
amounts to US$3million.
