When parties enter into a contract, they generally focus on a positive business relationship rather than anticipate a party may breach the contract and require litigation. As a result, parties may overlook including a forum selection clause when drafting the contract. Alternatively, one party overlook the specifics of a forum selection clause and its implications on future litigation.
Forum selection clauses should not be ignored. They can provide certainty as to where the parties will litigate disputes, which can be helpful particularly where the parties do not reside in the same state (or country). A forum selection clause for an unfavorable forum – or not having one at all – can cause headaches, particularly where one party finds itself having to litigate a dispute in a distant forum.
Georgia courts have adopted the Supreme Court’s conclusion that forum selection clauses are presumptively valid and enforceable unless the resisting party can show enforcement would be unreasonable under the circumstances. Houseboat Store v. Chris-Craft Corp., 302 Ga. App. 75, 797, 692 S.E.2d 1 (2010); Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). These circumstances generally require evidence of fraud, undue influence, or unequal bargaining power. See Houseboat Store v. Chris-Craft Corp.
In drafting a forum selection clause, specific words can have an impact. For example, courts “of” or “in” a particular state may read differently. The language used can also result in a permissive or a mandatory clause. A permissive clause expressly permits litigation in a specific venue without excluding other venues. This can result in a race to the courthouse. By contrast, a mandatory clause establishes an exclusive venue for disputes. Obviously, it is best to try and negotiate a clause which includes your state. Alternatively, the parties could consider a neutral location. The more precise the language, the better.
Please contact us for assistance in reviewing or drafting contracts.
