Home Field Advantage Applies To More Than Just Sports

Happy Easter!  For the first part in this series, we are going to discuss choice of law and jurisdiction.  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 its 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. 
 
Here are a few other things that may be of interest:

• February Update: Main Street Entrepreneurs – (Go Big Small Biz is on top of the critical issues impacting small businesses in PA; thanks to Jeff Wakeen and Tracy Wakeen for sharing)
• The Importance of Exit Planning (focuscfo.com) (Thanks to Robert Wood or sharing)
• Funding Leveraged Dividends through Mezzanine Debt Capital (attractcapital.com)
• The Value of Structured Equity (youtube.com); (Attractcapital.com)
• Keys to a Successful Transition of Your Family-Owned Business – RKL LLP (rklcpa.com)
• The Evolving Landscape of BOI Reporting Requirements – RKL LLP (rklcpa.com)
• The RKL Private Wealth Podcast, Episode 3: Boomers, Business and Buyers: Paving the Way for a Successful Transition – RKL LLP (rklcpa.com)
• Webinar | Tax-Saving Strategies for 2024: Choosing the Right Entity and Hiring Your Kids (nfib.com) (4/3@12pm)
• 2024 Cyber Readiness Forum (rklcpa.com) (5/8; 730am-130pm; Lancaster, PA)

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.