Welcome to the first “Boilerplate Blurb” post! I know long contracts can be scary (more frightening then going out for Halloween on a school night), but there are these provisions or clauses you keep seeing over and over in various agreements you sign. Well, I am here to provide you a quick understanding why we attorneys use these same clauses and wording time and time again.
The Jurisdiction Provision
Today’s boilerplate is the jurisdiction provision (aka forum selection provision). This type of provision looks something like this:
The Parties (a) consent to the exclusive jurisdiction and venue of the federal and state courts located in the state of Hawaii in any action arising out of or relating to this Agreement; (b) both Parties waive any objection they might have to jurisdiction or venue of such forums or that the forum is inconvenient; and (c) agree not to bring any such action in any other jurisdiction or venue to which either party might be entitled by domicile or otherwise.
What is Going On?
A family attorney once told me that a good lawyer looks at divorce before marriage. While, that might be a little pessimistic, an attorney would rather be thorough then blamed for the grief that a divorcing couple has to go through. The same is said for transactional attorneys: our question is what happens if the deal goes bad or the parties want to break the agreement and a lawsuit ensues?
When you bring a claim to court, in order for the court to hear the claim the court must have jurisdiction (the power over the subject) to even do anything about the claim.
Do you remember my discussion about the raising of Small Claims Court for claims to $5,000 in amount? Well, that is jurisdiction, Small Claims Court only has the power to hear claims/cases under $5,000. If your situation exceeds that amount you must have your case heard in Regular Claims Division, which has jurisdiction over claims that are over $5,000 and under $25,000.
Jurisdiction also includes location (usually, by state). Therefore, an attorney drafting an agreement for one party will often insert a forum selection provision to choose a jurisdiction favorable to one side. Favorable in the sense that: (1) the party already knows lawyers in the area; (2) does not need to travel and deal with travel costs; and (3) generally, has advantages of suing the other party in a state they are familiar with.
Clause in Action: Burgers in Michigan, Court Battles in Florida
A famous case, where a Michigan couple opened a Burger King franchise highlighted the importance of this clause. In the franchise agreement Burger King stated that any court fight would have to be done in Florida (where they are headquartered). When problems arose between the parties, the couple tried to say they did not understand the provision, but the court disagreed and they were forced to fight Burger King down in Florida from Michigan.
I like to use this case because I think Hawaii business owners appreciate the gravity of such a clause. We do a lot of trading with the West Coast states, and any long-term agreement you are going to want to look at if we have a fight, where are we suing the other party? Is it in California? Washington? Oregon?
The spooky part is for a local, small business, to be forced to fly to California and fight a company there because of one sentence in an agreement you signed three years ago. Enjoy your Halloween and next Boilerplate Blurb I will discuss jurisdiction provision clause’s best friend “governing law” provision as the two of them are sometimes combined or near each other in an agreement.
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*Disclaimer: This post discusses general legal issues, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction. Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.