Understanding Contract Law: What is a Forum Selection Clause?
Also referred to as a jurisdiction clause or a choice of court clause, a forum selection clause is a legally binding provision that determines the location at which a contract dispute will be heard. Though it is usually included deep in the boilerplate language of a commercial agreement, a forum selection clause is an important contract provision. Too often, individuals and companies fail to fully consider the importance of forum selection.
Forum Selection Clauses: Understanding the Basics
Choice of forum clauses are powerful and legally binding contract provisions. Though, they are not necessarily a matter of disagreement in every commercial relationship. For example, if you operate a small business in Miami and you enter a supplier agreement with another South Florida company, forum selection may not be much of an issue at all—both parties are likely to desire the same forum.
On the other hand, if you are involved in a contract with a company that operates outside of Florida, that firm may want to have any dispute heard in their home jurisdiction. For instance, a West Palm Beach business may enter a contract with an Atlanta-based firm and that firm may push for a forum selection clause that calls for all disputes pertaining to the contract to be heard in Georgia.
Presumption in Favor of Enforceability
One of the most important things to know about choice of forum clauses is that Florida law has a strong presumption in favor of enforceability. While courts will not rubber stamp these provision, they carry powerful force. Florida courts are not all that interested in litigation over where a dispute should be heard. As such, courts will only review choice of forum clauses on relatively narrow grounds. If a choice of forum clause was negotiated by both parties in good faith, there is a significant chance it will be enforced.
Know the Difference Between Forum Selection and Choice of Law
Though they are often linked, a forum selection clause is distinct from a choice of law clause. A forum clause governs venue—in other words, where a contract dispute will be heard. In contrast, a choice of law clause governs the body of law that will be used to resolve the dispute.
If a Florida company entered into a contract with a California company, the parties could voluntarily choose to include a choice of law clause that states that the agreement is governed by Florida state law. Choice of law clauses are often included in cross-border contracts, particularly international agreements.
While forum selection and choice of law often overlap, that is not always the case. Before finalizing a contract, it is imperative that you understand the implications of all provisions within the deal, including forum selection clauses and choice of law clauses.
Get Help From a Florida Contract Litigation Attorney Today
At Pike & Lustig, LLP, our West Palm Beach commercial litigation lawyers have considerable experience negotiating, drafting, and litigating complex commercial agreements. If you have questions about forum selection clauses, we are to help. Please contact us now to schedule a confidential, no obligation case evaluation.