Business Litigation Alert: "Don’t Ignore the Forum-Selection Clause "

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Ensuring Litigation Occurs Where You Want It

Companies often include a forum-selection clause in their written agreements to determine where any litigation proceedings will occur. Just as often, however, companies pay little or no attention to such clauses, believing them to be unenforceable “boiler-plate” and that any litigation will usually take place where it is most convenient for the parties.

Recently, however, the U.S. Supreme Court ruled in Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas that forum selection clauses in contracts will be enforced as written, regardless of the “convenience” factor.

The importance of the Supreme Court’s ruling is clear: businesses can no longer ignore the forum selection clause in their contracts.

As a result, to ensure that any litigation arising out of your contract will occur in the jurisdiction you prefer, you should:

  1. Read and understand the forum selection clause in your contract(s): Make sure it provides for the location that you prefer or be willing to accept the location stated in the contract. 
  2. Be Clear: Make sure the forum selection clause is clear as to which jurisdiction will be the place for the handling of any dispute(s).
  3. Weigh the costs and benefits of an alternative forum: If the other contracting party will not agree to your preferred forum, consider the costs and benefits of the contract in light of the possibility that you may have to litigate any dispute “far from home.”

With many companies entering into contracts across the nation and even internationally, litigation jurisdiction can be extremely important. Careful thought and planning must go into forum selection clauses when drafting contracts moving forward.

Topics:  Contract Formation, Forum, Forum Selection Clause

Published In: Civil Procedure Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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