When a commercial contract specifies that it is “governed by and construed in accordance with the laws of the United States,” or when “United States” appears as a defined term describing applicable law, jurisdiction, or party identity, the definition and scope of that term matters more than most founders realize. “United States” in a contract is not always as self-evident as it seems.
United States Definition in Federal Law
The legal definition of “United States” varies by context and statute. Under U.S. federal law, “United States” can mean:
- The federal government (as a legal entity capable of contracting, suing, and being sued)
- The 50 states plus D.C. (for most federal regulatory and tax purposes)
- All U.S. territories (Puerto Rico, Guam, U.S. Virgin Islands, American Samoa, Northern Mariana Islands) — included in some statutory definitions but excluded from others
- Geographic territory within U.S. sovereign jurisdiction, including continental U.S., Alaska, Hawaii, and territories
The IRS, for example, defines “United States” to include territories for some purposes (citizenship taxation) but not others (certain business tax elections). The same term can have different meanings within the same legal system depending on which statute applies.
Why “United States” Jurisdiction Language Determines Where You Get Sued
Jurisdiction and venue clauses that reference the “United States” define the court system—federal or state—and geographic scope of where disputes will be resolved:
Federal vs. State Court
A clause requiring disputes to be resolved in “courts of the United States” typically means federal courts—the U.S. District Courts and their appellate and Supreme Court structure. “Courts of the State of Illinois” means state court. The distinction matters because:
- Federal courts have limited subject matter jurisdiction; most commercial contract disputes belong in state court unless there’s diversity jurisdiction (parties from different states, amount over $75,000) or a federal question
- Procedural rules differ (Federal Rules of Civil Procedure vs. Illinois Code of Civil Procedure)
- Discovery, timelines, and motion practice vary significantly between federal and state court
Exclusive vs. Non-Exclusive Jurisdiction
Jurisdiction clauses can be exclusive (only the specified courts) or non-exclusive (permitting other courts as well). A contract that says “each party submits to the exclusive jurisdiction of the federal courts in the Northern District of Illinois” locks both parties into that forum. Non-exclusive clauses give a choosing party more flexibility but less certainty.
“United States” in Export Control and Sanctions Compliance
For tech startups, “United States” has critical significance in export control and sanctions compliance:
- EAR (Export Administration Regulations): The Bureau of Industry and Security (BIS) controls exports of goods, software, and technology from the United States. For EAR purposes, “United States” includes the 50 states, D.C., and territories.
- OFAC sanctions: The Office of Foreign Assets Control administers sanctions programs that apply to “U.S. persons”—defined to include U.S. citizens, permanent residents, entities organized under U.S. law (including foreign branches), and persons physically located in the U.S.
SaaS startups with international customers must include OFAC/export compliance representations in their terms of service and enterprise agreements.
“United States” in IP Licensing
Patent and trademark rights are territorial. A U.S. patent covers the “United States, its territories and possessions.” A license “limited to the United States” means the licensee can only practice the patent within U.S. jurisdiction—not in Canada, the EU, or other countries. If you have international customers using your licensed technology, check whether your license grant covers the territories where they’ll use it.
FAQ: United States in Contract Language
Does “laws of the United States” mean federal law only?
Usually yes—”laws of the United States” in a governing law clause typically refers to federal law. Parties who want state law to govern should specify: “laws of the State of Illinois.” Some contracts use both: “laws of the United States and the State of Illinois.”
What if a jurisdiction clause says “United States” but federal courts lack subject matter jurisdiction?
Courts will try to give effect to the parties’ intent. If the dispute is a commercial contract matter between Illinois parties without a federal question or diversity, a court may interpret the clause as choosing the federal forum to the extent available, or may find the clause ineffective for that dispute and allow state court jurisdiction.
Fitter Law helps Illinois startups draft jurisdiction clauses, governing law provisions, and international contract terms that work as intended. Learn about our contract services or view our flat-fee packages.