Key Takeaways

  • A forum selection clause designates the court or jurisdiction where contractual disputes will be resolved, ensuring predictability and limiting litigation costs.
  • Clauses can be mandatory (requiring disputes in a specific forum) or permissive (allowing but not requiring a forum). Wording choices like “shall” vs. “may” or “in” vs. “of” significantly affect enforceability.
  • Courts typically uphold these clauses unless exceptions like fraud, overreaching, public policy concerns, or extreme inconvenience apply.
  • Drafting clarity is critical — vague or overly broad clauses risk being invalidated.
  • Special considerations apply to consumer contracts, online agreements, and cross-border transactions, where additional legal standards may influence enforceability.

A forum selection clause is an agreement that determines the location and/or the court where the legal dispute will be settled. Essentially, it's establishing a venue that will provide the court with a personal jurisdiction. When this clause is present, the parties involved have agreed that subsequent disputes regarding the contract will be brought into a specific venue.

What's tricky about forum selection clauses is that any minor changes in the wording can have a major impact on its scope. For example, if you agree to a jurisdiction in courts "of" a certain venue, that does not mean the same thing as a jurisdiction in courts "in" a certain venue. Likewise, the phrase "shall" does not necessarily guarantee this type of clause is mandatory.

You'll find each court has a different approach when interpreting and enforcing these clauses. In fact, the results can be inconsistent. Therefore, it's so important to be as precise as possible when drafting a forum selection clause.

Examples of Forum Selection Clauses

  • The court that was set to hear the M/S Bremen v. Zapata Off-Shore Co. case had a reputation for bucking public policy. In this case, the court decided to rule against precedent, stating, "in light of present-day commercial realities... we conclude [a] forum selection clause should control absent a strong showing that it should be set aside."
  • In Stewart Organization Inc. v. Ricoh Corp., a lawsuit was filed which violated the forum selection clause. A request was submitted to maintain the court designated by the clause. The court's response was that a forum selection clause does not act as a controlling factor. Rather, it is merely a significant factor when a court is deciding if it will grant a transfer.

Exceptional Cases

  • In Atlantic Marine Const. Co. Inc. v. Dist. Ct. for the Western District of Texas, § 1404(a) and forum selection clauses became more distinct entities. The court stated a forum selection clause "shall be given controlling weight in all but the most exceptional cases," thus altering § 1404(a). There were two important findings:
    • A plaintiff's forum selection bears no weight. Furthermore, the plaintiff will need to demonstrate why the court outlined in the forum selection clause is no longer sufficient.
    • Although it's unlikely the court will stop the transfer of a case, they will consider the elements of public interest.

Atlantic Marine never stated whether other circumstances would constitute as an exceptional case. In the end, the court decided that the existence of fraud in contract negotiations invalidated the forum selection clause.

  • In the case of Carnival Cruise Lines Inc. v. Shute, a forum selection clause written into the contract was determined to be enforceable. Just because a contract did not result from negotiation does not mean it is an exception.

Drafting Strategies to Strengthen a Forum Selection Clause

Because forum selection clauses directly influence litigation outcomes, careful drafting is essential. Even minor linguistic choices can determine whether a clause is enforced or disregarded. To maximize enforceability:

  • Use clear, unambiguous language: Specify the exact court and location where disputes must be resolved. Ambiguous terms like “may” instead of “shall” or “governed by” instead of “exclusive jurisdiction” can weaken enforceability.
  • Address both jurisdiction and venue: Jurisdiction determines the court’s legal power, while venue specifies the geographic location. Stating both reduces interpretive disputes.
  • State exclusivity: Clearly indicate whether the clause is mandatory (“shall be brought exclusively in…”) or permissive (“may be brought in…”).
  • Align with choice-of-law clauses: A forum selection clause is more likely to be upheld if it is consistent with the governing law provision in the contract.
  • Consider potential inconvenience: While courts usually uphold forum selection clauses, they may refuse to do so if the designated forum imposes undue hardship, particularly for individual or small-business parties.

Invalidating a Forum Selection Clause

Courts have the ability to be selective when deciding to compel compliance to a forum selection clause.

  • In Global Seafood Inc. v. Bantry Bay, the court deemed a forum selection clause invalid due to its broad language. It found the phrase "governed by Irish Law and the Irish Courts" did not clearly state the intent to designate jurisdiction exclusively. On another note, Ireland was not mandated as the venue. More specifically, the court ruled that the use of the word "govern" may grant jurisdiction to the Irish courts, but it neglected to designate an exclusive jurisdiction. This deemed the forum selection clause invalid.

Situations Where Courts Refuse to Enforce a Forum Selection Clause

While courts generally respect the parties’ chosen forum, they will refuse to enforce a forum selection clause in specific circumstances. The most common reasons include:

  • Fraud or overreaching: If a party was tricked or coerced into agreeing to the clause, it may be deemed unenforceable.
  • Violation of public policy: Courts may refuse enforcement if the chosen forum’s laws or procedures violate fundamental public policy of the state or nation.
  • Unreasonable inconvenience: If litigating in the chosen forum is so burdensome that it effectively deprives a party of their day in court, the clause may be set aside.
  • Ambiguous or conflicting clauses: Vague terms or conflicting forum provisions in related agreements can render a clause invalid.
  • Non-mutuality in consumer contracts: In consumer or employment contexts, a clause that heavily favors one party (e.g., a large corporation) may be deemed unconscionable.

Permissive Versus Mandatory

When reviewing a forum selection clause, a court will decide if the forum selection clause is permissive or mandatory. A permissive clause will not prohibit litigation from taking place elsewhere. A mandatory clause, however, states that litigation must take place in the predetermined venue only.

  • In First Bank v. Georgia S04 Investments, the forum selection clause stated that a specific venue was to have jurisdiction to hear disputes related to the contract. The court decided this was a permissive clause since it did not require all disputes to be brought to the specified venue.

In fact, many forum selection clauses do not specify a particular court. Instead, these clauses tend to reference geographical areas, such as specific states or counties.

Forum Selection Clauses in Special Contract Types

The enforceability and drafting considerations of forum selection clauses can vary depending on the nature of the agreement:

  • Consumer contracts: Courts scrutinize forum selection clauses more closely when consumers are involved. A clause buried in fine print or presented on a “take-it-or-leave-it” basis is more likely to be challenged.
  • Online agreements: In digital contracts (such as website terms of service), courts examine how the clause was presented — click-wrap agreements are more likely to be enforced than browse-wrap agreements.
  • Cross-border contracts: International forum selection clauses must consider treaties, foreign enforcement rules, and the Hague Convention. Courts also examine whether the chosen forum has a logical connection to the transaction.
  • Commercial contracts between sophisticated parties: Courts are most deferential in these cases, assuming both parties understood and negotiated the terms.

Frequently Asked Questions

  1. What is the main purpose of a forum selection clause?
    It ensures that any legal disputes related to a contract will be resolved in a specific court or jurisdiction, providing predictability and reducing litigation costs.
  2. Are forum selection clauses always enforceable?
    Generally, yes — but courts may refuse enforcement if the clause is fraudulent, violates public policy, is unreasonably burdensome, or is ambiguous.
  3. What’s the difference between “permissive” and “mandatory” clauses?
    A permissive clause allows litigation in a particular forum but doesn’t require it. A mandatory clause requires all disputes to be resolved exclusively in the chosen forum.
  4. Can a forum selection clause be challenged in consumer contracts?
    Yes. Courts scrutinize these clauses more closely in consumer contexts, especially if they are hidden in fine print or heavily favor one party.
  5. How does a forum selection clause interact with a choice-of-law clause?
    The forum selection clause determines where disputes are resolved, while the choice-of-law clause determines which jurisdiction’s laws apply. They should align for maximum enforceability.

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