Within commercial law, a forum selection clause defines where disputes relating to a contract will be resolved. Through this provision, you can choose which court will have the power (also known as personal jurisdiction) to exercise authority over cases related to the contract in question.
Types of Forum Selection Clauses
There are three main types of forum selection clauses:
- To specify a particular court or jurisdiction: this type of clause indicates in which state, court, or venue the dispute must be litigated.
- To establish a specific dispute resolution process: this issue relates to what type of dispute resolution process must be used, such as arbitration or mediation.
- To define both a court and dispute resolution process: some types of forum selection clauses determine the type of resolution process required as well as the specific litigation venue. These clauses also mention the court required to resolve the issue if the initial resolution process fails.
In addition to the type of clause used, a forum selection provision can also be defined as either permissive or mandatory:
- Permissive forum selection clauses establish jurisdiction within a specific forum and venue but do not disallow litigation in other courts.
- A mandatory choice of forum clause clearly establishes that only the designated forum can be used for the jurisdiction and venue.
Forum Selection Clauses in Commercial and Contract Law
Forum-selection clauses are common within most commercial contracts. They are especially useful because they help make future ligations less unpredictable and expensive. As long as these clauses were agreed to by both parties, they tend to be legally enforced by most courts.
Even in the case that the contract is not legally valid, these clauses will typically remain enforceable unless the court deems the forum choice as unfairly burdensome to one of the two parties. Additionally, a poorly-drafted clause can create additional costly disputes and delays.
It is recommended that you include a forum selection clause in any commercial agreement. The primary reason for this is that omitting it can lead to you facing significant and costly obstacles.
If you do not agree on a mutually beneficial forum selection clause when drafting the agreement, the other party may choose a venue that is extremely inconvenient for you to reach. You may then be faced with extra expenditures or working with a new local counsel and more time spent researching your specific legal situation.
If a forum selection clause that is beneficial to you is chosen, you can steer clear of the following complications:
- You can avoid delays and the spending of additional resources in disputing where the case should be filed.
- You will not run the risk of litigating in a forum that is disadvantageous to your legal position.
- You will be able to work with your preferred representation and dispute resolution procedures.
It’s important to note that although a court has been selected by a forum selection clause, it may find that it should not exercise its jurisdiction due to the formal requirements or procedures not being met for that particular venue. Other courts may also find that the litigation may proceed despite the clause having established a different jurisdiction.
What is the Difference Between a Choice of Law and Choice of Forum Clause?
Forum selection clauses often go hand-in-hand with another type of contract clause called the “choice of law”. While a forum selection clause identifies the state or court where the case will be addressed, a choice of law provision defines which jurisdiction’s law will address the dispute.
By including forum selection and choice of law clauses in conjunction, both parties can expect a certain amount of predictability in the law that will be applied if a contract dispute arises.
Generally, the law chosen within the agreement will be upheld by the courtsto govern the dispute, as long as it is legal and doesn’t conflict with public policy.
What is a Forum Non Conveniens?
A forum non conveniens is a legal doctrine in which a court recognizes that another forum is more appropriate to handle a particular dispute. The case is then generally sent to the new court, which would lead to a change of venue.
This shift can occur when a conflict has occurred within a jurisdiction where all the witnesses or parties live, which is different from the one specified within the forum selection clause. Cases can only be moved between courts in different jurisdictions, states, or countries, and not between districts of the same state.
How Do I Choose a Legal Forum?
When choosing a forum for a legal agreement, your decision can be based on a number of possible grounds. The most obvious of which is that the location is convenient for all parties, nevertheless, there are other possible rationales:
- Jurisdiction over the parties, property, or witnesses involved in the dispute.
- For a special purpose or dispute resolution processes such as mediation or arbitration.
- When unique expertise is required due to the case having a complex subject matter.
- Any other reasoning fairly agreed upon by both parties.