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Does a forum selection clause matter for your business?

 

Do you know where you could be sued? If your business only operates here in Minnesota, the chances are that most litigation you would be involved with will occur in Minnesota. But that may not always be the case, and with some of your more important transactions, you may want to ensure that any litigation related to that transaction will occur in Minnesota.

A forum selection clause is the device used in commercial contracts to determine in advance which court will have jurisdiction for a matter. When selecting a forum, you need to choose a court that could have jurisdiction for your case. Typically, you will want to choose your "home" jurisdiction, but in a contract, you may have to negotiate that issue.

 

If you are engaged in commercial real estate development and your winning bid on the project brings in a contractor from outside Minnesota, it is likely that Minnesota is likely to be most practical location, as it will be the site the development and most witnesses would be located in this area, making it the most convenient.

However, it all of the design work were done in another state and litigation developed involving issues related to that aspect of the work, Minnesota might not be the most convenient or practical location.

Nonetheless, if a valid contract forum selection clause indicates Minnesota is the site chosen by the parties for the litigation, it is likely a court would enforce that provision.

There could be some situations where a court might not enforce a clause, but those circumstances have been described as "exceptional."

Your attorney could examine the home state of the other party to your transaction and review how their courts enforce forum selection clauses, and advise you on the need to include any specific language to ensure the clause is valid.

 

Source: law.cornell.edu, "Forum Selection Clause," page accessed October 2015

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