As discussed in Blog #1, a “choice of law” or “governing law” provision ensures that the law of a designated jurisdiction will govern disputes and matters of contract interpretation regardless of where the dispute is adjudicated. A “forum selection” or “venue selection” clause sets the particular state or court where adjudication will occur. Where a party litigates is often as important as, if not more important than, the strength of the party’s claim. Hence, parties should consider the following factors when selecting a forum:
- The convenience of litigating in a particular jurisdiction. It is costly to send witnesses, documents and to otherwise partake in litigation in a geographically inconvenient forum. Parties can limit financial costs and lost time by selecting a convenient forum.
- Home court advantage. An attorney litigating in his or her home court likely knows the local procedural rules and the preferences or tendencies of local judges.
- Whether federal or state courts are better equipped to handle a dispute. Parties should designate whether the intended venue is “state courts” or “state or federal courts” in the locale.
- Whether the clause should be drafted as “mandatory” or “permissive”. In the former, the parties are required to bring any dispute to the designated forum. In the latter, the parties are simply permitted to bring a dispute in the designated forum but are not required to do so. If the clause is intended to be mandatory, it should state that any dispute “shall be litigated” in the specified venue. As an alternative, a forum selection clause can provide for “exclusive jurisdiction” in a particular venue.