Home field advantage applies to more than just sports
I could not think of a better topic to celebrate the founding of our Country than the exciting contractual topics of Choice of Law and Jurisdiction (okay, I am sure there are better things to write about). Essentially, these two boilerplate clauses control the law that governs a contract and the forum (i.e., the location) that has jurisdiction to adjudicate a dispute. Next time you review a vendor contract from an out of state provider, take a look at those two provisions. I think you will be a bit surprised. Below are some key considerations for each:
Choice of Law
- How friendly or hostile is the type of law to you, your industry or potential issues that arise in your line of work? For example, if you are planning to sell retail goods in the State of California, you better understand their consumer protection laws. It can be an expensive dispute if you don’t know the local laws.
- How developed or sophisticated are the laws of the jurisdiction chosen for your industry or that of your vendor? For example, interstate lenders will typically look to apply laws from States like New York because they have a large base of commercial and financial companies and well-developed legal precedent in those industries.
Choice of Forum
- Does your contract have an exclusive or mandatory forum requirement? In this case, the contract will say that disputes can only be brought in the courts of a particular state, county, city and/or Federal district. If you are in Pennsylvania and your vendor is in Alaska and has a mandatory forum clause, this can be a very expensive legal bill for you if a dispute arises.
- Does your contract have a non-exclusive forum clause? While this seems to be a better option because it provides more flexibility, remember that both sides can choose where to file an action.
- Does your choice of forum have a well-developed court system to handle your type of dispute? For example, large corporations will choose Delaware as their choice of Forum because their Court of Chancery (i.e., Business Court) is well versed in business disputes.
These are just a few of the considerations when looking at these two important boilerplate principles. In general, you will find that these provisions are like sports competitions. Playing (or litigating) on your home turf typically gives you an advantage over your opponent. Please make sure that you seek advice from your professional business advisors if you have questions.
Next week we will look at indemnification, limitations on liability and warranties.
Enjoy the long weekend!
Here are a few other things that may be of interest:
- Employee Retention Credits – Its Not Too Late: What you need to know about claiming the tax credit in 2022 (7/6 @ 12pm)
Helpful Resource Pages
- Knowledge Center (eisneramper.com)
- Trout CPA Blog | Tax & Business-Related Topics
- Resources – Stambaugh Ness
- News & Analysis | Littler Mendelson P.C.
- Insights, Analysis & Perspectives for Your Business | RKL LLP (rklcpa.com)
- NFIB Research: Data and Trends Affecting Small Business Owners | NFIB
- The Tax Warrior Chronicles (taxwarriors.com)
As always, please don’t hesitate to email myself (email@example.com), Andy Miller (firstname.lastname@example.org), Christian Miller (email@example.com), Erik Spurlin (firstname.lastname@example.org) or anyone in our office with questions or comments.