Small business owners often wait for things to go wrong before consulting with attorneys. This is understandable. Consulting a lawyer can delay a transaction and nobody likes the added expense. Yet as the old saying goes, “an ounce of prevention is worth a pound of cure.” This axiom is certainly true when it comes to drafting contracts.
Many business owners enter into standard written contracts without bothering to read the fine print. In some cases, business owners will draft their own contracts without bothering to have an attorney review them. There are many reasons why this is a bad idea, and this article highlights one of them.
Imagine entering into a simple sales agreement or supply contract with a customer. Maybe you have done business with this customer before and don’t anticipate any problems. Or maybe you have relied on a simple form contract that you have used for years without a problem. After all, if it’s a simple transaction, shouldn’t the contract also be simple? But hold on a second.
Nobody likes thinking about what happens when a business relationship sours, and so hastily drafted contracts will often omit terms that specify how and where disputes are to be resolved. This can be an expensive mistake and can even lead to you being hauled into a distant courtroom where your company will be defending a lawsuit brought by a local citizen or employer.
And even if you’re the party who was forced to file suit in the first place, your chosen venue can be challenged in the defendant’s initial filings. Everybody wants home field advantage, after all.
In Pennsylvania, a party can file a preliminary objection to challenge a plaintiff’s choice of venue under Pa. R.C.P. 1028.. This sets up a multi-factor analysis through which a corporation can successfully challenge a plaintiff’s venue selection under certain circumstances. See Pa. R.C.P. 2179 (a).
This question can only be decided by a judge, and so there is a large body of case law on the venue issue in Pennsylvania. For example, if a contract does not specify otherwise, payment is presumed to be due at a plaintiff’s residence or place of business. Therefore, venue may be proper in a plaintiff’s home county when the breach of contract is due to a defendant’s failure to make payment. Lucas Enterprises, Inc. v. Paul C. Harman Co., 417 A.2d 720, 721 (Pa. Super. Ct. 1980). Of course, none of that analysis (and associated legal expense) will be required if your contract addresses the issue at the outset.
The main take-away here for small business owners is that is wise to have legal counsel review your contracts so that you can avoid expensive venue fights in the first place. After all, if you end up in court, you will want to focus your attention and litigation budget on the merits of the case rather than the location of the courtroom.
