Forum Selection Clause: The Importance

As owner, director, or office in a company, you undertake many transactions to further your business.  In doing so, you often enter into contracts with outside parties.  These parties may be from anywhere–whether they be international, national, or local.  When contracting with a company, whether it be the first time or for the hundredth time, the outcome of the contract may be unpredictable, despite your best instincts.  Therefore, much like most of the world, contracts may be unpredictable.  As such, any predictability is welcome.  That is why your company should consider inserting forum selection clauses in your contracts with other parties.

A forum selection clause is especially important when dealing with companies or individuals from other jurisdictions, but can also help when dealing with parties from within your jurisdiction.  These clauses allow the parties to agree that any ensuing litigation resulting from the contract will be initiated in a specific forum.  The forum selection clause can be very specific or very broad.  It may refer to a particular court in a jurisdiction agree upon by the parties. Alternatively, the clause might refer to a specific kind of dispute resolution process.  These alternative dispute resolution processes may be mediation, arbitration, or a hearing before a special referee.  The forum selection clause may even include both types of selections.

The importance of a forum selection clause lies in its predictability.  You can choose specifically what jurisdiction your dispute will be heard in, thereby allowing you to hire the appropriate counsel and best prepare for a case according to that jurisdiction’s rules.  Alternatively, you may use it as a means to choose a forum that is most convenient to you, or one that you have experience in.  Familiarity with a specific jurisdiction’s rules cannot be understated.  Further, a forum selection clause can also lead to reduced costs. If you choose a forum convenient to you, naturally there will be fewer costs associated with litigation.  If you choose an alternative dispute resolution clause, the savings over going to court can be tremendous.

In sum, inserting a forum selection clause can be in the best interest of your company.  It provides predictability and savings benefits for your company.  Consulting with the right legal team can help insert the right forum selection clause into your contracts.  Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.