Monday, November 5, 2018

Forum and Venue Selection Clauses in Contracts - What You Need to Know

The Location, or "Venue" of a Legal Dispute is Critically Important

When folks call to discuss contracts with me, one of the very first questions I ask them is "what state is identified in the agreement?"  Very, very few lay people are ready with an answer.  All qualified lawyers are, however.  That is because the court in which a dispute is to be litigated is critically important.

Forum Selection Clause Generally Found
on One of Last Two Pages of Contract
The Problems Caused by Forum Selection Clauses in Breach of Contract Disputes

Imagine you live in Pennsylvania and you signed a contract with a company located in Utah.  The contract states that any litigation arising out of the contract is to be conducted in Salt Lake City.  No matter how solid your claim for breach of contract is, litigating that claim in Salt Lake City wil be a hardship. 

First, you have a to find a lawyer in Utah. You may have a relationship with counsel in Pennsylvania, and you and he/she have an understanding and history concerning billing practices, not to mention a relationship of trust.  That history will be of little use now.

Second, you will have to travel to Utah for any depositions or court-required appearances.  A 4-hour deposition  thus morphs into a 3-day trip at great expense.

Finally, your opponent will likely have a "home court advantage."  It is called getting "home-towned."  Many state court judges are elected, and if you think it does not enter their minds that one of the party's before them can vote and make campaign contributions, well...

Negotiate a Choice of Venue Clause in Any Contract You Intend to Sign

Contracts contain two basic components - the parties' promises, and the parties' agreement as to how to deal with a breach of the contract.  If you are preparing a contract, do yourself a favor and include a forum selection clause, selecting your local state and federal courts as "the location for any disputes arising out of or related to the contract."

If you are considering accepting an offer made to you, try at the very least to select a forum that is convenient to you - or at least more convenient than a remote state selected in the draft agreement.

Once a dispute reaches a court, all parties have lost.  A venue selection clause helps to deter litigation in many situations.  It is wise not to ignore its inclusion in your contract.

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