When it comes to commercial contracts, one of the critical clauses is the choice of court agreement clause. This clause determines the jurisdiction where any disputes arising from the contract will be resolved, and it is crucial to have clear and concise language in this clause. However, a commonly overlooked clause that can have significant implications is the midnight clause. In this article, we will explore the perils of the midnight clause in the choice of court agreement.

The midnight clause is a provision in the choice of court agreement clause that specifies the time at which the agreement is deemed to have been concluded. This clause is usually included in commercial contracts that involve parties in different time zones. It aims to determine which jurisdiction`s law applies to the contract.

However, the problem with the midnight clause is that it can create confusion and ambiguity. For instance, if the contract is concluded at midnight in one jurisdiction, it may not be midnight in the other party`s jurisdiction. This can lead to disagreements over which jurisdiction`s law applies, which can be costly and time-consuming to resolve.

Moreover, the midnight clause can also create issues related to the validity of the contract. In some jurisdictions, contracts concluded after a certain time of the day may be considered void or unenforceable. If the midnight clause is not drafted carefully, it could lead to the contract being deemed invalid in one jurisdiction, even though it is enforceable in another.

Another potential problem with the midnight clause is that it could be used as a tactical tool by one party to gain an advantage over the other. For instance, if one party is aware that the other party`s jurisdiction has a midnight cut-off time for contract validity, they could intentionally delay the signing of the agreement until after midnight in that jurisdiction, thereby making the contract void in that jurisdiction.

To avoid these perils, it is crucial to draft the choice of court agreement clause carefully and clearly. It should specify the governing law and jurisdiction clearly, without relying on the midnight clause to determine the law that applies. Additionally, parties should consider including a time zone clause that specifies the time zone that applies to the contract. This can help avoid confusion and disagreements over the time of contract conclusion.

In conclusion, the choice of court agreement clause is a critical clause in any commercial contract. However, the inclusion of a midnight clause can create confusion, ambiguity, and even legal issues. To avoid these perils, parties should draft the clause carefully and clearly, with specific reference to governing law and jurisdiction. This can help avoid costly and time-consuming disputes over the validity of the contract and the application of the law.