What Is a Choice of Forum Provision in a Contract and Why Is It Important

These provisions are usually found in the “boilerplate” language of the agreement, but this status does not diminish their importance. Choice of jurisdiction and applicable law clauses help the parties avoid unnecessary disputes regarding the court having jurisdiction over the parties or the dispute and the applicable law. Forum selection clauses are common in most commercial contracts. They are especially useful because they help make future ligatures less unpredictable and expensive. As long as these clauses have been agreed by both parties, they are usually legally enforced by most courts. It should also be noted that there is a grey area in defence case law, commonly referred to as the forum non conveniens. In principle, a party submitting to a particular forum is not deemed to waive its right to challenge jurisdiction to the extent that the forum is not the most convenient place to plead, having regard to all the circumstances. Therefore, it is customary for authors to attach an explicit waiver of the right to oppose a forum non conveniens. A forum selection clause is intended to give a court “personal jurisdiction” and to determine the “place of jurisdiction”. Personal jurisdiction is the power of the court to exercise authority over a party.

Place is the physical place where a court exercises its power. For example, a jurisdictional clause is intended to give a court in a given place the power to settle a dispute. Although the provisions relating to the selection of forums are generally enforceable, certain aspects must be taken into account when drafting, challenging or executing a forum selection clause. First, the party against whom the provision is applied must have received a “notice” that the provision is included in the document. This requirement has been significantly relaxed over the past 10 to 15 years, but it is not uncommon for forum selection determinations to be placed in capital letters or any other font that distinguishes them. There are, of course, a few exceptions. First, there is the pervasive exception of “public order.” There are also specific choice of law rules that cannot be contractually changed. For example, the choice of law rules set out in Article 9 of the Unified Commercial Code (with respect to secured transactions) apply, which govern the place of filing of financing statements and govern the sale of withdrawn collateral and other similar matters, regardless of the will of the parties. This position is justified for reasons of uniformity and because third parties who are not part of the agreement of the parties are affected by such things.

“Any dispute arising out of this contractual relationship shall be governed by the laws of the State of New York and shall be resolved exclusively in the state or federal courts located in New York, New York.” A choice of jurisdiction clause (sometimes referred to as a dispute resolution clause, jurisdiction clause, jurisdiction clause or arbitration clause) in a conflict of laws element allows the parties to agree that all disputes relating to that contract will be resolved in a particular forum. They usually operate in conjunction with a choice of applicable law clause of the respective contract. This postponement may arise if a conflict has arisen in a jurisdiction where all witnesses or parties live, which is different from that specified in the jurisdiction selection clause. Cases may only be moved between courts of different jurisdictions, states or countries and not between districts of the same state. The development of forum selection clauses for federal courts or their application raises other questions. The U.S. Supreme Court in Bremen v. Zapata Off-shore Co., 407 U.S. Many state courts follow the above-mentioned decision of the United States Supreme Court in Bremen. See Professional Insurance Corp.c.

Sutherland, 700 So.2d 347 (Ala. 1997). Some courts apply a more flexible approach, which is included in the reformulation and gives the courts considerable discretion to refuse to choose a party as a meeting place. Jurisdiction of applicable law and choice of location need not be identical, and parties may avail themselves of the benefits of Alberta`s substantive laws while submitting to the procedural laws of another jurisdiction. In most cases, however, the parties choose an applicable law and jurisdiction from a single jurisdiction. Although the words “attorn” and “submit” are often used as part of a jurisdiction clause, Canadian laws and international treaties generally refer to “submission” to a jurisdiction. In addition, the use of “attorn” comes from a real estate context and can cause confusion among international parties. When choosing a forum, the parties may submit to exclusive or non-exclusive jurisdiction.

Exclusive jurisdiction means that legal action can only be brought in the selected forum. Non-exclusive jurisdiction provides the parties with some flexibility, as it allows more than one court to rule on the action. Parties intending to have exclusive jurisdiction must make this clear in the clause. Courts cannot apply a provision of exclusive jurisdiction if a party can demonstrate a “valid reason” for an alternative jurisdiction, such as.B. the appropriateness of the place of jurisdiction, the applicable law agreed by the parties, the strength of the parties` jurisdiction, and whether there are public policy reasons for refusing the place of jurisdiction. In cases where the parties are located in different jurisdictions, you should consider adding a provision to this clause that appoints a representative for each party to serve the proceedings in relation to any dispute arising out of the agreement. As regards both the choice of applicable law and the choice of jurisdiction, it must be argued that this wording covers only claims arising out of the contract and not automatically an action in tort. If tort claims are to be covered, it may be advisable to include additional language to ensure they are covered.

Many employees and employers draft these clauses without much thought or do not try to negotiate them when concluding a contract. However, these clauses are important, and employers and employees should think about the impact they have before a dispute arises. Recently, a New Hampshire employee, Mr. Fraize, found at his expense that the choice of jurisdiction provision was an obstacle to his breach of contract, salary, and unlawful dismissal claims. The U.S. District Court for the District of New Hampshire issued a decision, Fraize v. Fair Isaac Corporation, 2017 DNH 0005 (4. January 2018), in which it was determined that Mr.

Fraize could not sue his employer in New Hampshire, but had to sue in Minnesota. Mr. Fraize had entered into an agreement with his employer to participate in a sales incentive plan in relation to his commissions. The agreement included a jurisdiction clause stating that all actions related to this plan must be taken exclusively in the state and federal courts of Hennepin County, Minnesota. The court ruled that the jurisdiction clause was enforceable and covered both his claim under wage law and his claims for unlawful dismissal. Fraize argued unsuccessfully that it would be “seriously uncomfortable for him to travel to Minnesota. In addition, the court noted that a Minnesota court could apply New Hampshire law to the compensation law and unlawful dismissal claims. The court noted that legal claims requiring a party to make a claim in a specific location could prevail over a choice of location clause. In addition to the existence of overriding public interest factors, Atlantic Marine does not indicate whether other factual circumstances may constitute an “exceptional case”. However, the Bremen Court held that the existence of fraud and excess of power in the negotiation of a contract invalidated the selection clause of the forum itself. Therefore, their presence should be an exceptional case under the Atlantic Navy. In addition, Bremen arguably supports the general view that any legal theory that allows a party to invalidate the jurisdiction selection clause itself, for example a mutual material error, is an exceptional case in the context of the Atlantic Navy.

The State of New York has a law that expressly addresses circumstances in which a New York court cannot dismiss a claim on the basis of the forum non conveniens if the parties` contract provides that the agreed location is a New York court and the transaction is for an amount greater than $1 million. In many cross-border contracts, the place of jurisdiction to resolve disputes may not be the same as in the country whose law governs the contract. The contract may provide for a multi-stage procedure for the settlement of disputes. For example: As a general rule, a jurisdiction selection clause applies to all contracting parties. However, it is possible that a contract states that if A wants to sue B, one procedure applies, and if B wants to sue A, another procedure applies. The legality of asymmetric clauses differs from one legal system to another. For example, they are generally enforceable under English law, but not under French law. [6] [7] On the other hand, you may want a forum selection clause that`s right for you. In this way, you can help avoid the following: A forum non conveniens is a legal doctrine in which a court recognizes that another forum is better suited to deal with a particular dispute. .