by Ward J. Mazzucco – No, there is nothing wrong with the courts in Idaho. If you get into a lawsuit, however, you don’t want it to be far from your home or business. Once the pandemic subsides, parties and witnesses will again be required to attend court in person. If you have to fly witnesses and principals back and forth to a distant court, and put them up in hotels, you will spend lots of time and money. Litigating in a distant court could mean that your claim or defense, however meritorious, is just too expensive and distracting to assert.
How can that happen? When reviewing a proposed contract, clients naturally focus on the business terms. Price? Specifications? Quantity? Delivery date? Check! Once those commercial terms are settled, clients often pay less attention to the fine print toward the end of the document. That is where parties can gloss over seemingly standard legal provisions.
Many contracts contain a “forum selection clause.” In this provision, the parties decide, in advance, where any lawsuit should be conducted. As you can imagine, large companies typically specify courts convenient to them. State laws often provide that consumers are entitled to have litigation near where they live. State laws rarely protect businesses in this way.
Here is an example. A company in Connecticut could order goods or software from a company in Boise for use in Connecticut. In case of a dispute, the contract may specify that any lawsuit must take place in Boise. So, if the goods or software are deficient, the Connecticut company must sue in Boise. If the Connecticut company withholds payments, the seller can bring suit in Boise. Either way, it’s convenient for the company in Boise—and a major headache for the Connecticut company. If the Connecticut company nevertheless sues in Hartford, the court will most likely dismiss the case upon the request of the Idaho company. And just imagine what could happen if the other party was in Tokyo, instead of Boise….
What to do? While negotiating with other parties, see if their draft contracts have a forum selection clause. It is best to negotiate these provisions while the seller is eager to make a sale. There are plenty of workarounds, such as selecting a more neutral site, using arbitration, or deleting the clause altogether.
Further, when preparing your own contracts, consider carefully where disputes should be resolved. You want to be fair to other parties, but ultimately you would prefer a forum convenient for you.
No one ever wants to get involved in litigation. Getting involved in distant litigation is even worse. Whether reviewing a contract from someone else—or preparing a contract of your own—make certain that you are fully satisfied with where any litigation would occur.