When parties are negotiating the terms of a deal, it is easy to overlook the possibility that, somewhere down the road, significant disagreements could emerge. While it may be difficult to discuss future disputes at a time when both parties are getting along, it is best to agree on a method of resolving conflicts before one actually appears.
ne aspect of anticipating the resolution of future conflicts is determining where any such resolution will occur. To this end, venue selection clauses allow parties to agree in advance where their disputes will be settled. For example, a contract can state that disputes will be resolved in a particular country, state, or even city.
Although venue and forum selection clauses are closely related, a venue selection clause sets the geographic location for the resolution of any dispute, while a forum selection clause chooses the particular court or arbitrator that will decide the matter.
The Benefits of a Proper Venue Selection Clause
A properly-drafted contract will include a venue selection clause in order to reduce the potential costs and stress of resolving any future disputes between the parties.
Money: Litigating a dispute in a foreign state or country can significantly add to the costs of dispute resolution. As a threshold matter, travel expenses for shuttling necessary parties to and from an out-of-town venue can add up. In addition, litigating a matter in a foreign jurisdiction typically requires the retention of local attorneys, which can be a significant expense.
Time: Traveling takes time and time costs money. Business owners and employees may need to attend hearings, and time spent away from work will cost the company even more money.
Familiarity: Litigating out of state may require the use of local counsel in that jurisdiction. When a party litigates close to home, it can use a law firm that it is already familiar with.
Peace of Mind: It can be difficult to predict how and when a contract dispute may arise. At least knowing where the dispute will be resolved can help alleviate some of the burdens associated with litigation or arbitration.
A venue selection clause is only beneficial if it can be enforced. If such a clause is not properly drafted, then parties might not receive the benefits that they thought they bargained for.
Enforcement of Venue Selection Clauses in Massachusetts
Generally, Massachusetts courts will enforce venue selection clauses, and parties seeking to challenge them must overcome a heavy burden. To overcome this heavy burden, the challenging party must demonstrate any of the following:
(1) The clause was agreed to as a result of fraud or exploitation.
(2) Enforcement would be unreasonable and unjust.
(3) Enforcement will deprive the challenging party of their day in court.
(4) Enforcement is against a strong public policy in that forum.
If none of these situations apply, the clause may still be challenged if it is not drafted with mandatory language. A venue selection clause that merely suggests or permits a dispute to be settled in a certain venue has the potential to be disregarded. However, the use of the words “will” or “shall” typically indicate that the clause is mandatory and that the dispute can only be resolved in the location specified.
For example, in the case Provanzano v. Parker View Farm, Inc., 827 F. Supp. 2d 53, 60 (D. Mass. 2011), the U.S. District Court for Massachusetts explained that this venue selection clause was mandatory, as opposed to merely permissive: “This agreement shall be governed by the laws of the State of Kentucky, and the venue shall be in Woodford County.” By using mandatory terms (like “will” or “shall”), and combining forum and venue selection clauses with one another, the parties in that case negotiated and were bound by an enforceable, mandatory venue selection clause.
Analysis of any particular venue selection clause is done on a case-by-case basis, and it is important for contracting parties to obtain the advice of legal counsel who is attentive to current law in this area.
Beck Reed Riden LLP Excels In Commercial Dispute Resolution
With years of experience handling all stages of complex litigation from injunction proceedings to trials and appeals, Russell Beck, Stephen Riden, and Will Haddad provide thoughtful guidance to companies. Because of our extensive litigation experience, we regularly advise companies and organizations of all sizes in their day-to-day operations, helping them resolve conflicts creatively so they can return to productive business pursuits. Beck Reed Riden LLP can be reached now for a free consultation via email (info@beckreed.com) or telephone (617-500-8660).