We live in a global economy. But that doesn’t mean that you want to travel halfway across the globe if there is dispute with one of your contracts.
One of the great boilerplate provisions in many contracts is the Choice of Forum clause. This provision dictates where a lawsuit will be resolved.
Oftentimes, it’s simply in the state of the company who drafted the document, and you probably don’t give much thought to it.
However, in a recent Delaware case, SRL Mondani, LLC v. Mondani Spa Resort, the forum clause itself became the subject of litigation.
After being sued in Delaware court, the defendants tried to move the case to Israel because that is where the witnesses and documents are located. This is a typical argument when trying to change the forum of a case: “It’s just too inconvenient to resolve the dispute where it was originally filed.”
However, with current technology, and as the court stated in this case, “modern methods of communication,” it’s relatively easy and seamless to obtain all the information you need, and even depose witnesses via Skype or other telecommunications devices. While the court did acknowledge that the defendants’ owners were in Israel and had no relationship to Delaware, the court also said that the principals were very sophisticated and had the ability to negotiate the forum clause. For this reason, the court upheld that Delaware should be the location where the dispute resolution proceedings occurred. Further, the court finally stated, because the dispute was about enforcement of contracts requiring the application of Delaware law, Delaware was the best forum.
It is a very important, yet commonly overlooked clause in a contract
I always stress the importance of the forum clause to my clients, because it is a very important, yet commonly overlooked clause in a contract. While nobody enters a contract thinking that it could go awry or will lead to a dispute, having a strategically negotiated Forum Clause and Choice Of Law Clause can provide significant litigation leverage and strategic advantage if a dispute does ever arise.
If you have any questions about the forum clause or contracts in general, give me a call at 248-455-6500 or email me at firstname.lastname@example.org