A more thorough explanation:

Governing law is a legal term that refers to a clause in a contract that specifies which law will be used to resolve any disputes that may arise between the parties involved. This clause is also known as a choice of law provision.

For example, if a company based in New York enters into a contract with a company based in California, they may include a governing law clause that specifies that the laws of New York will apply in the event of a dispute. This ensures that both parties are subject to the same laws and regulations, and prevents one party from having an unfair advantage over the other.

The governing law provision is generally respected by courts, which will typically defer to the parties' agreement regarding the applicable law. This means that if a dispute arises, the court will apply the law specified in the governing law clause, rather than applying the law of the jurisdiction where the dispute occurred.