What is a forum selection clause?
A forum selection clause is used in a contract to designate the location, process, and/or court that will resolve any legal disputes that may arise between the parties named in the agreement. These clauses range from very specific to extremely broad and all encompassing. A specific clause would indicate the type of court (state/federal) and jurisdiction (often specifying courthouse as well as city/county).
There are essentially two types of forum selection clauses: permissive and mandatory. Permissive gives some wiggle room for both parties, suggesting a forum, but the plaintiff has discretion. Whereas, when a mandatory clause is used, there is no allowance for circumstantial latitude because the forum is predetermined. Making the decision between the two depends heavily on your situation. An experienced attorney will be your best resource when deciding what type of dispute resolution will work best for your agreement.
How to determine if a clause is “permissive” or “mandatory”
In determining whether a forum selection clause is permissive or mandatory, the actual language of the clause must be examined to determine if it clearly requires exclusive jurisdictions. S.W. Va. R.P.S, L.L.C. v. C.T.I. Molecular Imaging, Inc., 74 Va. Cir. 117, 117 (Cir. Ct. 2007).
A forum selection clause is permissive if the clause permits but does not require specific forums. A permissive forum selection clause uses words like “may” and “non-exclusive.” The plaintiff has the option to choose another forum. For example, if the clause indicates that any dispute may be resolved in Henrico County Circuit Court, but the plaintiff would like to file in Federal Court, then the plaintiff has the right to use a Federal Court as long as it has appropriate jurisdiction.
A forum selection clause is mandatory if it requires the parties bring disputes to a specific forum. This type of clause uses words like “shall be” or “exclusive.” In a mandatory clause, if the plaintiff files suit in a different forum, the defendant has grounds for dismissal or transfer. Using the above example, if the clause exclusively designates a state court in Virginia, and the plaintiff files in federal court in New York, the defendant could be granted a dismissal. Similarly, some clauses require disputes to be heard by a special referee, an industry specific forum. In this type of clause, the plaintiff should first attempt to resolve the dispute through the special referee, not a state or federal court.
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