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Forum Selection Clauses and Their Impact on Your Commercial Contracts

fine printWhen you and a potential business partner contemplate entering into a commercial contract, there are many things to which you can agree and make binding on both sides by including relevant terms in your agreement. One of these issues is deciding, in advance, where you will litigate disputes if a problem arises later. There are many different ways to structure these clauses, with some being permissive and some being mandatory. In a recent case from Miami, the Third District Court of Appeal upheld a dismissal of a case brought here because the parties had a contract with a mandatory clause dictating California as the place to litigate disputes.

Forum selection clauses in commercial contracts can be very useful for businesses. They can provide you with an extra layer of protection against the possibility of being hauled into court in a place that is disadvantageous for you. If you and your contract partner include a forum selection clause in your agreement, you can make it mandatory or permissive. If it is mandatory, the place you list in the clause is the only place you can go to contest your dispute.

Florida law does not have any “magic words” that, when inserted into a forum selection clause, automatically make it a mandatory clause. In Florida, the standard for a mandatory clause is “when read as a whole, the forum selection clause indicates that the parties intended to try a case in the specified forum and to the exclusion of all others.”

This issue of mandatory versus permissive forum selection clauses was at the center of the recent dispute between a California-based sign maker and a company that makes vehicle title loans. The two sides had entered into a contract for the lender to make a purchase from the sign maker. The agreement said that the “purchase order shall be deemed entered into and performed in the State of California and Buyer consents to the jurisdiction of the State of California for purposes of enforcement of the terms hereof.”

Problems arose between the two sides, and the buyer sued…in Miami. The sign maker filed a motion to dismiss the case. The seller argued that the language in the contract created a mandatory forum selection clause and that the dispute must be litigated in California. The trial court agreed and dismissed the case.

The buyer appealed but lost again. Even if a clause doesn’t contain typical mandatory-language words like “must” or “shall,” it can still be a mandatory forum selection clause if “it limited the appropriate forum to only one option, to the exclusion of all others.” In this situation, the clause’s language contained the word “shall” and also had sufficient indicators of exclusivity to lead the appeals court to uphold the dismissal. The clear intent of the language was to make California the one and only place for litigating contract disputes. “Were this case to proceed in Florida, the words of exclusivity in the clause would be rendered meaningless,” according to the court’s opinion.

Whether you are considering entering into a commercial contract or pursuing litigation related to an existing commercial agreement, the experienced Florida commercial litigation attorneys at Stok Folk + Kon are here to help. Our team of attorneys has many years of experience helping businesses and business people pursue contracts that make sense for them and, when necessary, pursue litigation that protects their rights and interests.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

More blog posts:

Airplane Seller Lacked Minimum Contact with Florida, Couldn’t Be Sued Here for Non-Payment of Commission, Florida Business Lawyers Blog, Feb. 21, 2017

Defending a Florida Commercial Litigation Case When Your Business is a Non-resident, Florida Business Lawyers Blog, June 30, 2016