Boilerplate, Part Three, Forum Selection Clause

23 01 2012

Another clause you almost always find in a contract is a Forum Selection Clause.  This clause specifies the place where disputes will be resolved.  It will say that disputes under the agreement will be resolved in the courts of a certain jurisdiction, and that, by signing the contract, you grant jurisdiction over any resulting dispute. The clause may even require you and the other party to consent to service of process in a specific manner.

THE RISK: By signing an agreement with such a clause, you are agreeing to the forum provided. If the jurisdiction selected in the contract is not your state of residence, you risk the time and expense required to fight a lawsuit in a distant state (or even country!). This can cause you great inconvenience. If a distant jurisdiction is listed in the forum selection clause, it is important to specify what law will apply to the contract. This is usually included in a Governing Law Clause (discussed in the previous installment).

THE REWARD: You can structure this clause in a way that is convenient for you, ensuring that a dispute will be resolved in your state of residence. If you are entering into a contract with an individual or entity located outside the United States, this clause can place the contract firmly under United States jurisdiction, and allow you to resolve disputes in the US. You can also use this clause to state the method of service in case of a dispute, which is valuable when your potential adversary is not local.