By: Roger J. Buffington
Buffington Law Firm’s breach of contract attorneys have litigated many breach of contract cases involving California businesses. If a dispute erupts and one side files a lawsuit, it is important that the parties have given careful thought to the conditions under which the lawsuit will occur. In this brief Blog article we will discuss one very common pitfall, which is a hostile jurisdiction and venue clause contained in a contract. It is proverbial that a business agreement never looks so good again as on the day that the parties sign the written contract. It is human nature for the parties to believe that things will go well, both parties will do the things that they promise, everyone will make money, and so forth. But a lot of cases do involve someone suing on the contract alleging breach of contract and it is important that, when entering into a contract, that the parties pay attention to the provisions in the contract that deal with what conditions apply to any lawsuit that may occur.
One of the most common pitfalls that can lurk in a contract is a hostile venue and jurisdictional clause. This is a problem that Buffington Law Firm’s breach of contract attorneys encounter all too often. If the two parties to the contract are in different jurisdictions, it is common for one side to try to slip in a clause that says that any dispute is governed by the laws of that side’s jurisdiction (e.g. state) and that the dispute must be litigated there. Even worse, for parties in different states (or worse, different countries) sometimes the contract clause will state that the entire contract is governed by the laws of that party’s jurisdiction. Parties often think that such language is “boilerplate” and not really part of the contract negotiation, and indeed these clauses are often buried among other paragraphs that seem like boilerplate. But in fact, slipping in a favorable contract term of this sort is often a tactic that one side’s lawyer will attempt in order to gain a significant advantage should the contract go to litigation. For example, a California company is seriously disadvantaged if that contract is governed by, and subject to only being litigated in say, New York. The California company’s attorneys are probably not licensed to practice in New York, and New York law can differ significantly from California in certain respects. The California company may have to hire New York counsel, who will likely be lawyers with whom the company has no prior relationship, and who do not really know the company. Just having to travel to New York for trial will be a significant disadvantage. Sure, there are ways to deal with this problem. But make no mistake, a clause like this gives a distinct advantage to the New York party to the contract, i.e. the party whose jurisdiction and venue are specified in the venue and jurisdiction clause. Courts will ordinarily honor these clauses on the grounds that the parties themselves all agreed to these conditions, however unfairly the jurisdiction and venue clauses may operate in actual application.
Buffington Law Firm’s breach of contract attorneys have often acted as local counsel for out of state firms litigating in California, or have appeared pro hac vice in other states when this was necessary. But this always means that the out-of-state party is enduring extra expense and inconvenience. Expense and inconvenience that may have been avoidable.
If you or your company are engaged in a breach of contract lawsuit, Buffington Law Firm is always prepared to help. We invite you to contact us for a free legal consultation. All consultations are with experienced commercial trial attorneys and are completely confidential and protected by the attorney-client privilege.