Forum selection: Overview, definition, and example
What is forum selection?
Forum selection refers to a clause in a contract that specifies the particular jurisdiction or venue where legal disputes related to the contract will be resolved. This clause designates the court or location (often a specific state or country) where any legal actions, such as lawsuits or arbitration, must be filed and heard. Forum selection clauses are used to establish certainty and predictability for the parties involved in a contract by clarifying where any legal disputes will be adjudicated.
For example, a company based in New York and a supplier based in California may include a forum selection clause in their contract stating that any disputes will be resolved in New York courts, regardless of where the dispute actually arises.
Why is forum selection important?
Forum selection is important because it provides clarity and reduces the potential for disputes regarding where legal actions should be filed. It allows the parties to agree in advance on a neutral or mutually convenient location, avoiding the confusion and potential costs associated with choosing a venue after a dispute arises. This helps save time, money, and effort in legal proceedings.
For businesses, forum selection clauses can offer strategic benefits, such as choosing a jurisdiction known for being business-friendly or one that is familiar to the company. It also minimizes the risk of "forum shopping," where parties might try to file a case in a jurisdiction with laws that are more favorable to their case.
Understanding forum selection through an example
Imagine two businesses, Company A based in Texas and Company B based in Florida, entering into a contract for the sale of goods. To avoid any confusion or disputes about where to file a lawsuit in case of a breach, the contract includes a forum selection clause stating that any legal action must be brought in Florida courts. If a dispute arises, both parties will have agreed in advance to resolve the issue in Florida, saving time and potential conflicts over jurisdiction.
In another example, an international company enters into a service agreement with a foreign supplier. The contract includes a forum selection clause specifying that any disputes will be resolved in London courts, ensuring that both parties know where any legal matters will be settled, regardless of where the contract was executed or the location of the parties.
Example of forum selection clause
Here’s how a forum selection clause might appear in a contract:
“The Parties agree that any legal action or dispute arising under or in connection with this Agreement shall be resolved exclusively in the courts located in [insert jurisdiction], and the Parties hereby submit to the jurisdiction of such courts for the purposes of any such dispute.”
Conclusion
Forum selection clauses are vital tools for ensuring that parties to a contract agree on the location where legal disputes will be resolved. By establishing the jurisdiction or venue in advance, these clauses help avoid confusion, reduce litigation costs, and prevent forum shopping. For businesses, forum selection provides strategic advantages and ensures that disputes are handled in a predictable and efficient manner. Whether in domestic or international agreements, clearly defining the forum for dispute resolution is an essential part of managing legal risks and ensuring the smooth enforcement of contracts.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.