Forum Selection Clauses

Forum Selection Clauses

Choosing the Court Where a Dispute Will Be Litigated

A forum selection clause is a contractual provision in which the parties agree, in advance, where disputes arising from their relationship will be litigated. Businesses routinely use these clauses in commercial contracts, employment agreements, licensing agreements, technology contracts, financing documents, shipping agreements, and international transactions. Individuals may encounter them in terms of service, consumer contracts, leases, and other agreements.

A forum selection clause can appear deceptively simple. A contract might state that disputes “shall be brought exclusively in the courts of New York,” for example. But that short sentence can raise several important legal questions. Does it require litigation in New York, or merely permit it? Does “New York” mean state courts, federal courts, or both? Does the clause apply to every possible dispute between the parties? Can a court disregard the clause because another forum would be more convenient? What happens when the dispute involves parties or conduct in several states or countries?

These questions make forum selection clauses an important part of conflict of laws and procedural law.

Cornell Law School’s Legal Information Institute explains the broader concept of conflict of laws through its Cornell Wex discussion of Conflict of Laws, a field concerned with situations in which more than one jurisdiction may have a legitimate connection to a dispute.

The central principle is straightforward:

A forum selection clause determines, or helps determine, where litigation should occur; it does not ordinarily determine what substantive law the court must apply.

That distinction is fundamental. A contract can require a dispute to be litigated in California while separately providing that New York law governs the contract. The California court may therefore apply New York substantive law while serving as the chosen forum.

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1. What Is a Forum Selection Clause?

A forum selection clause is a contractual agreement concerning the judicial forum in which disputes will be resolved.

For example, a contract might provide:

“Any dispute arising from this Agreement shall be litigated exclusively in the state or federal courts located in New York.”

The parties have attempted to establish New York as the forum for litigation.

Another provision might say:

“The parties consent to the jurisdiction of the courts of New York.”

This language may also affect where litigation can occur, although its legal effect can differ from an express requirement that litigation be brought exclusively in a particular forum.

Forum selection clauses therefore exist on a spectrum. Some are highly restrictive. Others merely identify a forum that the parties agree is acceptable.

The exact wording matters.

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2. Forum Selection Is Different From Choice of Law

One of the most important distinctions in conflict of laws is between forum selection and choice of law.

A forum selection clause answers:

Where will the dispute be litigated?

A choice-of-law clause answers:

Which jurisdiction’s law will govern the dispute?

Consider this contract:

“This Agreement shall be governed by the laws of the State of New York. Any litigation arising from this Agreement shall be brought exclusively in the courts of California.”

The two provisions perform different functions.

New York is selected as the governing law.

California is selected as the forum.

The result may therefore be a California court applying New York law.

This is not unusual in sophisticated commercial transactions.

The parties may select a forum because it is geographically convenient, commercially experienced, predictable, neutral, or otherwise desirable, while selecting another jurisdiction’s law because that jurisdiction’s legal rules are preferred.

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3. Why Do Parties Use Forum Selection Clauses?

Without a forum selection clause, litigation can become a preliminary dispute about where litigation itself should occur.

Imagine that a company headquartered in Texas enters into a contract with a company headquartered in Illinois. The contract is negotiated through representatives in several states, the services are performed partly online, and payments are processed elsewhere.

A dispute arises.

The plaintiff might attempt to sue in Texas.

The defendant might argue that Illinois is more appropriate.

Another possible forum might also have jurisdiction.

Before the parties even begin litigating the underlying contractual dispute, they may spend substantial time and money arguing about the appropriate court.

A forum selection clause can reduce this uncertainty.

It can provide:

• greater predictability;
• reduced preliminary litigation;
• lower jurisdictional costs;
• greater certainty for businesses;
• protection against unexpected forums;
• easier planning for international transactions; and
• greater control over the location of future litigation.

For businesses conducting transactions across multiple jurisdictions, this predictability can be commercially valuable.

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4. Mandatory and Permissive Forum Selection Clauses

Not all forum selection clauses have the same legal force.

A major distinction is between mandatory and permissive clauses.

A mandatory clause requires litigation to occur in the designated forum, assuming the clause is otherwise enforceable.

A permissive clause identifies a forum where litigation may occur but does not necessarily prohibit litigation elsewhere.

Compare the following:

“Any action arising from this Agreement shall be brought exclusively in the courts of New York.”

This is strongly mandatory.

Now compare:

“The parties consent to the jurisdiction of the courts of New York.”

This may be permissive rather than mandatory, depending on the language and the applicable law.

The difference can be critical.

A mandatory clause may permit a defendant to ask another court to dismiss or transfer an action filed outside the selected forum.

A permissive clause may merely establish that the selected court has jurisdiction without excluding other available forums.

Courts therefore examine the actual language used by the parties.

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5. Words Such as “Exclusive,” “Sole,” and “Only”

Certain words strongly suggest that the parties intended an exclusive forum.

Examples include:

• exclusively;
• solely;
• only;
• must;
• shall;
• exclusive jurisdiction;
• exclusive venue; and
• nowhere other than.

For example:

“The parties agree that the courts of Delaware shall have exclusive jurisdiction over all disputes arising under this Agreement.”

This language strongly indicates that Delaware was intended to be the exclusive forum.

By contrast:

“The parties consent to jurisdiction in Delaware.”

may establish consent to Delaware jurisdiction without necessarily establishing that Delaware is the only permissible forum.

Courts do not mechanically apply one magic word in every case. Contract interpretation depends upon the agreement as a whole and the governing legal rules.

Nevertheless, careful drafting can substantially reduce uncertainty.

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6. Forum Selection and Personal Jurisdiction

A forum selection clause can also be closely connected to personal jurisdiction.

Normally, a court must have lawful authority over the defendant.

That authority can arise through constitutional minimum contacts, applicable statutes, consent, or other recognized jurisdictional bases.

A valid forum selection agreement can provide an important basis for consent to jurisdiction.

Suppose a company located in Nevada signs a contract providing:

“The parties consent to the exclusive jurisdiction of the state and federal courts located in New York.”

The Nevada company may later have difficulty arguing that it never consented to New York jurisdiction if the clause is valid and applicable.

This illustrates why forum selection clauses can be powerful.

They do not simply identify a convenient courthouse. They can affect the parties’ jurisdictional rights.

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7. Forum Selection and Venue

Forum selection is also closely related to venue, but the concepts are not identical.

Jurisdiction concerns a court’s legal authority to hear a dispute.

Venue concerns the appropriate geographic location for litigation within the judicial system.

A contract might therefore provide:

“Exclusive venue shall lie in the United States District Court for the Southern District of New York.”

This language identifies a particular federal judicial district.

Another contract might say:

“Any dispute shall be brought in New York.”

That language is broader and may require interpretation.

The distinction becomes particularly important when drafting clauses involving federal courts.

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8. State Courts and Federal Courts

A forum selection clause should be drafted carefully if the parties intend to select a particular type of court.

For example:

“The parties agree to exclusive jurisdiction in the state courts located in New York County.”

This language may indicate that the parties intend to select state courts.

Alternatively:

“The parties agree that any action shall be brought exclusively in the United States District Court for the Southern District of New York.”

This identifies a federal court.

Another clause might provide:

“Any dispute shall be brought exclusively in the state or federal courts located in New York County.”

This allows either state or federal court, assuming the selected court otherwise has subject-matter jurisdiction.

That final qualification matters.

Parties cannot simply create federal subject-matter jurisdiction by writing it into a contract.

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9. Parties Cannot Contractually Create Subject-Matter Jurisdiction

Forum selection should not be confused with subject-matter jurisdiction.

Parties may generally agree to litigate in a particular forum when the legal requirements for that forum are satisfied. But private agreement cannot ordinarily manufacture subject-matter jurisdiction that the Constitution or Congress has not granted.

For example, parties cannot simply write:

“The United States Supreme Court shall have jurisdiction over all disputes arising from this contract.”

Such language does not independently give the Supreme Court original jurisdiction over an ordinary private contractual dispute.

Likewise, parties cannot transform a state-law dispute into a federal case merely by labeling a federal court as the selected forum.

A forum selection clause operates within the jurisdictional structure established by law.

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10. Federal Courts and the Enforcement of Forum Selection Clauses

Forum selection clauses receive particularly important treatment in federal litigation.

A leading Supreme Court decision is The Bremen v. Zapata Off-Shore Co., in which the Court recognized that forum selection clauses are not automatically invalid merely because they require litigation in another forum.

The Court emphasized the importance of respecting contractual agreements concerning the appropriate forum, particularly in international commercial transactions.

The decision helped establish a strong federal policy favoring enforcement of reasonable forum selection agreements.

But enforcement is not automatic in every imaginable circumstance.

Courts may consider whether the clause is valid, whether it applies to the dispute, and whether extraordinary circumstances justify declining enforcement.

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11. The Bremen and the Modern Approach

The Bremen involved an international commercial agreement and became a foundational case in the modern law of forum selection clauses.

The Supreme Court rejected the idea that a forum selection clause should automatically be disregarded simply because the selected forum is inconvenient for one party.

Instead, the Court treated such clauses as important contractual commitments.

This reflects a broader principle of modern commercial law:

Courts generally take seriously the forum that sophisticated parties deliberately selected in their agreement.

The principle is particularly significant in international commerce, where uncertainty about litigation location can otherwise create substantial transaction costs.

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12. Forum Selection Clauses Are Presumptively Enforceable in Many Contexts

Following The Bremen and later Supreme Court decisions, federal courts generally begin from the premise that a valid forum selection clause should be enforced.

That does not mean that every clause is automatically enforceable.

Rather, the party seeking to avoid the clause generally needs a legally recognized reason for doing so.

Possible issues include:

• fraud;
• overreaching;
• lack of meaningful consent;
• ambiguity;
• unconscionability;
• improper scope;
• impossibility;
• violation of public policy; or
• circumstances making enforcement legally inappropriate.

The precise standard depends upon the circumstances and the applicable procedural law.

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13. Atlantic Marine and Mandatory Forum Selection Clauses

The Supreme Court’s decision in Atlantic Marine Construction Co. v. U.S. District Court is particularly important for federal civil procedure.

The case involved a mandatory forum selection clause and addressed what happens when a party files suit in a federal district other than the agreed forum.

The Court held that a valid forum selection clause should receive substantial weight in the federal court’s analysis of whether the case should be transferred.

In practical terms, the clause changes the normal analysis.

The parties have already agreed on the appropriate forum.

The court therefore does not treat the case as though the parties had never addressed the issue.

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14. Transfer Under 28 U.S.C. § 1404(a)

When a federal case is filed in an improper or inconvenient forum despite a valid forum selection clause, 28 U.S.C. § 1404(a) may become important.

Section 1404(a) permits federal courts to transfer civil actions to another federal district for the convenience of parties and witnesses and in the interest of justice, when statutory requirements are satisfied.

A valid forum selection clause can significantly affect that analysis.

In Atlantic Marine, the Supreme Court explained that when the parties have selected a different federal forum, the private-interest factors ordinarily should not be used to undermine the parties’ agreement.

The selected forum is therefore given substantial contractual significance.

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15. Forum Selection and Forum Non Conveniens

Forum selection clauses also interact with the doctrine of forum non conveniens.

Forum non conveniens allows a court, in appropriate circumstances, to decline to exercise jurisdiction because another available forum is substantially more appropriate for resolving the dispute.

Without a forum selection clause, a court may conduct a traditional forum non conveniens analysis.

With a valid mandatory forum selection clause, however, the parties have already expressed their preference.

The selected forum therefore receives substantial weight.

In international litigation, this can be especially important.

For example, imagine that a U.S. company and a French company agree that disputes will be litigated exclusively in Paris.

If the U.S. company later files suit in a U.S. court, the French company may argue that the contractual forum-selection provision requires the dispute to proceed in France.

The U.S. court must then consider the validity and scope of the clause and the appropriate procedural mechanism for enforcing it.

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16. International Forum Selection Clauses

Forum selection clauses are particularly common in international contracts.

International transactions may involve:

• different countries;
• different legal systems;
• different languages;
• different procedural rules;
• different enforcement mechanisms;
• different discovery practices;
• different damages rules; and
• different approaches to commercial litigation.

The parties may therefore negotiate the forum as carefully as they negotiate price, payment, warranties, liability, and termination.

An international agreement might provide:

“Any dispute arising out of or relating to this Agreement shall be submitted exclusively to the courts of England and Wales.”

Or:

“Any dispute shall be resolved exclusively by the federal courts located in New York.”

The selected forum can substantially influence the practical character of the dispute.

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17. Mandatory Forum Selection in International Contracts

International courts generally have their own rules concerning recognition and enforcement of contractual forum selection clauses.

When U.S. courts encounter an international forum-selection provision, they may consider principles developed in The Bremen and subsequent federal decisions.

The international nature of the transaction can actually strengthen the argument for enforcement because international commercial parties are often presumed to understand the importance of specifying a predictable forum.

The clause can serve as a mechanism for allocating litigation risk before a dispute occurs.

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18. Choice of Forum Does Not Necessarily Mean Choice of Law

A common mistake is to assume that selecting a court automatically selects that court’s substantive law.

It does not necessarily do so.

Consider:

“All disputes shall be litigated exclusively in the courts of Illinois.”

This clause concerns the forum.

It does not necessarily state:

“Illinois law shall govern.”

The parties could separately provide:

“This Agreement shall be governed by the laws of Delaware.”

The result could be litigation in Illinois under Delaware law.

This distinction is particularly important in conflict-of-laws litigation.

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19. The Forum’s Choice-of-Law Rules May Matter

Once a court is selected, the forum’s conflict-of-laws rules may become important.

A court may have to determine which jurisdiction’s substantive law governs the underlying dispute.

In federal diversity litigation, federal courts generally apply the choice-of-law rules of the state in which they sit. This principle comes from Erie Railroad Co. v. Tompkins and Klaxon Co. v. Stentor Electric Manufacturing Co.

Thus, selecting a forum can indirectly influence the choice-of-law process because the selected court may apply a particular jurisdiction’s conflicts methodology.

This creates an important strategic consequence:

Choosing a forum can sometimes influence the legal rules that determine which substantive law ultimately governs the dispute.

The forum and governing law therefore remain conceptually separate but practically interconnected.

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20. Forum Selection and “Forum Shopping”

Forum selection clauses can reduce a particular form of forum shopping.

Forum shopping occurs when a litigant attempts to select the jurisdiction believed to offer the most favorable legal or procedural environment.

If parties have already agreed that litigation must occur in a particular forum, one party may have less freedom to search for another jurisdiction perceived as more favorable.

The clause therefore operates as a form of contractual allocation of litigation risk.

This is one reason courts often take forum selection provisions seriously.

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21. Can a Forum Selection Clause Be Challenged?

Yes.

A party may challenge a forum selection clause by arguing, for example, that:

• it never agreed to the clause;
• the contract was fraudulently induced;
• the clause itself was procured through fraud;
• the provision is unconscionable;
• the language does not cover the dispute;
• the clause is ambiguous;
• the selected forum is unavailable;
• enforcement would violate public policy; or
• exceptional circumstances make enforcement inappropriate.

The burden and precise legal test can vary depending on the court and the nature of the challenge.

A party cannot generally avoid a forum-selection clause merely by saying that another forum would be more convenient.

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22. Fraud and Forum Selection Clauses

Fraud can create complicated questions.

There is an important distinction between:

fraud affecting the entire contract, and

fraud specifically affecting the forum selection provision.

If a party argues that the entire contract was induced by fraud, that does not necessarily automatically invalidate the forum clause.

Courts may separately examine whether the agreement to the forum-selection provision itself was obtained through fraud or whether the clause is otherwise invalid.

This distinction reflects the principle that contractual provisions can sometimes be analyzed separately.

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23. Unconscionability

A forum selection clause may also be challenged on unconscionability grounds in appropriate circumstances.

This issue can arise particularly in contracts involving substantial disparities in bargaining power.

For example, a consumer contract might require an individual consumer to litigate every dispute in a distant jurisdiction thousands of miles away.

The enforceability question may then depend on the contract’s formation, applicable law, the particular circumstances of the parties, and whether enforcement would be fundamentally unfair.

Courts do not automatically invalidate forum selection provisions simply because one party has fewer resources.

But unusually oppressive contractual terms can present serious enforceability questions.

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24. Consumer Contracts

Forum selection clauses can become more complicated when one party is a consumer rather than a sophisticated commercial entity.

Businesses often have greater freedom to negotiate contract terms.

Consumers may instead encounter forum provisions in:

• online terms of service;
• credit agreements;
• travel contracts;
• warranties;
• subscription agreements;
• employment-related documents; and
• consumer service contracts.

The enforceability of such clauses can depend heavily on applicable state and federal law.

Courts may consider how the contract was presented, whether the consumer agreed to it, the language of the clause, the relationship between the forum and the transaction, and any applicable statutory protections.

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25. Online Contracts and Clickwrap Agreements

Modern commerce has created new questions concerning forum selection clauses contained in online agreements.

A website might require users to click:

“I agree to the Terms of Service.”

The Terms of Service might contain a provision stating that all disputes must be litigated in a particular state.

The central issue may become whether the user actually agreed to the contractual terms.

Courts distinguish among different forms of online contracting, including clickwrap, browsewrap, and related forms of electronic assent.

The enforceability of the forum provision can therefore depend on contract formation as well as the substantive validity of the clause.

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26. Forum Selection in Employment Agreements

Employment agreements may also contain forum provisions.

For example:

“Any action arising from or relating to this Agreement shall be brought exclusively in the state or federal courts located in New York.”

Such a provision may become relevant to disputes involving:

• employment contracts;
• confidentiality;
• trade secrets;
• noncompetition agreements;
• compensation;
• intellectual property;
• wrongful termination; or
• contractual benefits.

However, employment disputes may also be affected by mandatory statutes that restrict contractual waivers or impose special rules concerning where certain claims may be brought.

A forum clause therefore cannot be analyzed in isolation from applicable legislation.

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27. Forum Selection in Intellectual Property Agreements

Licensing and technology agreements frequently contain forum-selection provisions.

For example, a software license might specify that all disputes must be litigated in federal court in California.

The clause may be particularly important because technology businesses often operate across many jurisdictions.

A single company may have:

• employees in several states;
• customers nationwide;
• servers in multiple jurisdictions;
• intellectual property registered federally; and
• international customers.

A forum-selection clause can establish a predictable litigation location despite this geographic dispersion.

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28. Forum Selection in Corporate Agreements

Corporate and commercial agreements frequently contain forum provisions.

Examples include:

• merger agreements;
• shareholder agreements;
• acquisition agreements;
• financing agreements;
• distribution agreements;
• franchise agreements;
• joint-venture agreements;
• securities agreements; and
• corporate bylaws.

These provisions can become especially significant when disputes arise among parties located in different states.

The parties may select a jurisdiction because that jurisdiction has specialized commercial courts, experienced judges, predictable procedural rules, or a well-developed body of corporate law.

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29. Delaware and Corporate Litigation

Delaware provides an important example of how forum selection can become intertwined with corporate law.

Many corporations are incorporated in Delaware, and Delaware has specialized courts and a substantial body of corporate jurisprudence.

Corporate documents may therefore contain provisions directing certain disputes to Delaware courts.

Such provisions can reflect the parties’ desire for disputes involving the corporation’s internal affairs to be resolved in a jurisdiction with extensive experience in corporate law.

The enforceability and scope of any particular provision still depend on the governing legal framework.

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30. Forum Selection and Arbitration

Forum selection clauses should also be distinguished from arbitration agreements.

An arbitration clause generally requires disputes to be resolved outside the ordinary court system through arbitration.

A forum-selection clause generally determines which court will hear litigation.

The two can appear together.

For example:

“Disputes shall be resolved by arbitration seated in New York. Any application to compel arbitration or enforce an arbitral award shall be brought exclusively in the courts of New York.”

The first provision concerns arbitration.

The second concerns judicial proceedings connected to the arbitration.

Drafting must therefore distinguish between the arbitral forum or seat and the courts that may supervise or enforce the arbitration.

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31. The Scope of a Forum Selection Clause

Even when a forum selection clause is valid, another question remains:

Does the clause cover this particular dispute?

Consider:

“Any dispute arising under this Agreement shall be litigated exclusively in California.”

A dispute about payment under the agreement plainly appears to fall within the clause.

But what about a separate tort claim?

What about a statutory claim?

What about a dispute involving a related corporation that did not sign the contract?

What about a claim concerning conduct occurring before the agreement was signed?

These questions concern the scope of the clause.

Courts may examine the language of the provision and the relationship between the claims and the contractual relationship.

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32. “Arising Under” Versus “Relating To”

Drafting language can affect scope.

A clause covering disputes:

“arising under this Agreement”

may be interpreted differently from a clause covering disputes:

“arising out of or relating to this Agreement.”

The second formulation is generally broader because “relating to” can encompass disputes having a substantial relationship to the contractual arrangement even when the claim does not arise strictly from a contractual provision.

The precise interpretation remains dependent upon the applicable law and judicial precedent.

For this reason, sophisticated agreements often use carefully drafted language intended to identify the full range of disputes covered.

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33. Third Parties and Non-Signatories

Forum selection becomes more complicated when someone who did not sign the contract attempts to enforce or avoid its forum provision.

Examples might include:

• corporate affiliates;
• parent companies;
• subsidiaries;
• agents;
• employees;
• officers;
• insurers; or
• third-party beneficiaries.

The central question may be whether the non-signatory can be bound by, or benefit from, the contractual forum provision.

Courts have developed different doctrines for addressing such circumstances.

The existence of a forum selection clause does not automatically mean that every person connected to the transaction is bound by it.

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34. Forum Selection and Related Claims

A single lawsuit may contain multiple claims.

Some may clearly fall within the forum-selection clause while others may not.

For example, a contract may contain an exclusive forum provision covering contractual disputes. The plaintiff might nevertheless bring:

• breach of contract;
• fraud;
• negligence;
• unjust enrichment; and
• statutory claims.

The court may need to determine which claims are sufficiently connected to the agreement to fall within the clause.

The analysis can become especially important when the plaintiff attempts to avoid the selected forum by characterizing the dispute as a tort rather than a contract claim.

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35. Can Parties Choose a Foreign Forum?

Yes, subject to applicable law.

A U.S. contract can designate a foreign forum.

For example:

“All disputes arising from this Agreement shall be submitted exclusively to the courts of London, England.”

A U.S. party that later files suit in California may face a motion seeking dismissal or another appropriate form of relief based on the forum-selection provision.

The Bremen is particularly important in understanding the federal treatment of international forum-selection agreements.

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36. Foreign Forums and International Comity

When a contract selects a foreign court, principles of international comity can become relevant.

International comity reflects the recognition that courts operating within one sovereign legal system should, in appropriate circumstances, respect the legitimate judicial acts and interests of other sovereign legal systems.

A contractual selection of a foreign forum can therefore implicate broader international considerations.

However, comity does not mean that U.S. courts automatically surrender their jurisdiction whenever a foreign forum is mentioned in a contract.

The court must analyze the contractual provision and applicable legal principles.

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37. What Happens When the Selected Forum Is Unavailable?

Sometimes the designated forum cannot hear the dispute.

A court might no longer exist in the contemplated form, lack jurisdiction over the dispute, or be legally incapable of providing an adequate forum.

The resulting analysis depends upon the wording of the clause and the circumstances.

An exclusive forum provision can create difficult questions if the chosen forum becomes genuinely unavailable.

Courts may then consider whether the parties intended the clause to operate only if the selected forum remained available or whether another forum should be permitted.

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38. Public Policy and Forum Selection

Public policy can sometimes limit enforcement.

For example, a legislature may enact a statute protecting certain categories of claims or parties from contractual restrictions on where litigation may occur.

Similarly, enforcement may be challenged where the chosen forum would effectively eliminate rights that applicable law treats as nonwaivable.

Public policy questions are therefore highly dependent on the particular legal context.

A forum selection clause is powerful, but it is not a private amendment to the Constitution, statutes, or mandatory procedural rules.

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39. Forum Selection Clauses and Fundamental Fairness

The modern judicial approach generally favors enforcement of reasonable forum-selection agreements.

Nevertheless, courts retain authority to consider whether enforcement would be fundamentally unjust under the circumstances.

The fact that a forum is inconvenient does not necessarily make it unfair.

International commerce in particular often requires parties to accept some inconvenience in exchange for predictable contractual arrangements.

The stronger the contractual agreement and the more sophisticated the parties, the more difficult it may be to justify ignoring the selected forum merely because litigation elsewhere would be preferable.

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40. The Difference Between “Convenient” and “Legally Unfair”

This distinction is important.

A defendant may say:

“Litigating in New York is expensive for me.”

That does not necessarily invalidate a New York forum-selection clause.

A different argument would be:

“The clause was never agreed to.”

Or:

“The clause was obtained through fraud.”

Or:

“A mandatory statute makes this provision unenforceable.”

Those arguments attack the legal validity or enforceability of the provision rather than merely its convenience.

Courts generally distinguish inconvenience from genuine legal unfairness.

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41. Drafting a Strong Forum Selection Clause

A carefully drafted forum selection clause should address several questions.

The drafter should consider:

1. Is the forum mandatory or permissive?
2. Is state court, federal court, or either intended?
3. Which geographic location is selected?
4. What disputes are covered?
5. Does the clause cover related tort and statutory claims?
6. Does it apply to affiliates and third parties?
7. Is a separate choice-of-law clause necessary?
8. Is consent to personal jurisdiction stated expressly?
9. Is venue addressed?
10. What happens if the selected court cannot hear the dispute?

These questions can prevent considerable litigation later.

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42. Example of a Broad Mandatory Clause

A commercial contract might provide:

“Any and all actions, proceedings, or disputes arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the state courts located in New York County, New York, or, to the extent federal subject-matter jurisdiction exists, in the United States District Court for the Southern District of New York. Each party irrevocably submits to the personal jurisdiction of such courts and waives any objection based on inconvenient forum or improper venue to the fullest extent permitted by law.”

This clause attempts to address several issues simultaneously:

• mandatory forum;
• geographic location;
• state and federal courts;
• scope of covered disputes;
• personal jurisdiction; and
• objections based on forum and venue.

Actual drafting must always be evaluated under the law governing the particular transaction.

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43. Forum Selection Clauses and Litigation Strategy

For litigants, a forum-selection clause should be examined before filing a lawsuit.

A plaintiff who ignores a mandatory clause may face:

• dismissal;
• transfer;
• additional litigation expenses;
• delay;
• sanctions in exceptional circumstances; or
• difficulty explaining why the contractual commitment should not be enforced.

A defendant may use the clause as an early procedural defense.

The clause can therefore influence litigation strategy from the very beginning.

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44. Motions to Enforce Forum Selection Clauses

When a party files suit in a forum different from the agreed forum, the opposing party may seek relief through an appropriate procedural mechanism.

In federal court, depending on the circumstances, this can involve:

• a motion to dismiss;
• a motion to transfer under § 1404(a);
• forum non conveniens;
• or another applicable procedural mechanism.

The correct mechanism can depend on whether the selected forum is another federal district, a state court, or a foreign court.

This is one reason forum selection belongs at the intersection of contract law, civil procedure, and conflict of laws.

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45. Forum Selection Does Not Eliminate Jurisdictional Analysis

Even a carefully drafted forum clause does not make every jurisdictional question disappear.

A court may still need to determine:

• whether the agreement exists;
• whether the parties consented;
• whether the clause is valid;
• whether the clause covers the dispute;
• whether the selected court can exercise subject-matter jurisdiction;
• whether the selected forum is legally available; and
• what procedural rules govern enforcement.

Forum selection simplifies jurisdictional uncertainty, but it does not eliminate the legal framework surrounding jurisdiction.

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46. A Practical Example

Consider a technology company incorporated in Delaware with headquarters in California.

It enters into a distribution agreement with a company headquartered in Germany.

The agreement provides:

“This Agreement shall be governed by Delaware law. Any dispute arising out of or relating to this Agreement shall be brought exclusively in the state or federal courts located in Delaware.”

Two years later, a dispute arises over alleged breach of the distribution agreement.

The German company files suit in California.

The California company argues that the lawsuit belongs in Delaware.

The analysis may proceed through several questions.

First, is the forum provision valid?

Second, is it mandatory?

Third, does the dispute fall within its scope?

Fourth, did the German company agree to it?

Fifth, does the selected Delaware court have subject-matter jurisdiction?

Sixth, what procedural mechanism is available to enforce the clause?

Seventh, what effect should the clause have on arguments concerning convenience or forum non conveniens?

The choice-of-law provision creates a separate question: Delaware law may govern the agreement even though the dispute’s factual connections extend across California and Germany.

This example demonstrates why forum selection and choice of law must be analyzed separately.

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47. Forum Selection as Contractual Risk Allocation

At a deeper level, a forum selection clause is a mechanism for allocating litigation risk.

Before a dispute exists, the parties decide:

If we eventually disagree, where will we fight?

That decision can affect:

• litigation costs;
• travel;
• access to witnesses;
• procedural rules;
• judicial familiarity with the relevant subject;
• discovery;
• timing;
• enforcement;
• choice-of-law analysis; and
• settlement strategy.

The parties are therefore making a strategic decision at the moment the contract is formed.

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48. Why Forum Selection Matters in Conflict of Laws

Conflict of laws is often presented as a question of which law applies.

But the identity of the court can be equally important.

Different courts may:

• apply different choice-of-law methodologies;
• interpret contractual provisions differently;
• apply different procedural rules;
• have different approaches to jurisdiction;
• have different rules concerning discovery;
• reach different conclusions about the scope of contractual provisions.

Consequently, selecting the forum can influence the entire procedural environment in which the dispute is resolved.

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49. Forum Selection Is Not Always the Same as “Choice of Court”

In ordinary conversation, people may say that the parties have “chosen the court.”

Legally, however, the agreement may perform several different functions.

It may select:

• a geographic forum;
• a particular state;
• a federal judicial district;
• state courts;
• federal courts;
• exclusive jurisdiction;
• permissive jurisdiction;
• venue; or
• a combination of these.

The exact language determines what the parties actually agreed to.

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50. Forum Selection Clauses in the Broader Conflict-of-Laws Framework

Forum selection clauses fit into a larger sequence of questions that arise when a dispute crosses jurisdictional boundaries.

A court may ask:

1. Does it have subject-matter jurisdiction?
2. Does it have personal jurisdiction?
3. Was service properly made?
4. Is venue proper?
5. Is there a valid forum-selection clause?
6. Does the clause require litigation elsewhere?
7. Is the clause mandatory or permissive?
8. Does it cover the particular dispute?
9. Should the case be transferred or dismissed?
10. Which law governs the underlying claims?
11. Can the resulting judgment be enforced?

Forum selection therefore occupies a crucial position between jurisdiction and choice of law.

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51. Key Takeaways

The most important principles concerning forum selection clauses are these:

1. A forum selection clause identifies where litigation should occur.
2. A choice-of-law clause identifies which jurisdiction’s law should govern.
3. The two clauses perform different legal functions.
4. Forum selection clauses may be mandatory or permissive.
5. Words such as “exclusive” and “only” strongly indicate mandatory selection.
6. A valid forum selection clause can provide contractual consent to personal jurisdiction.
7. Parties cannot create federal subject-matter jurisdiction merely by contract.
8. Federal courts generally give substantial weight to valid forum selection clauses.
9. The Bremen is a foundational Supreme Court decision concerning enforcement of forum selection clauses.
10. Atlantic Marine is especially important for federal enforcement and transfer questions.
11. A forum-selection clause does not automatically determine the substantive law governing the dispute.
12. The selected forum’s conflict-of-laws rules may nevertheless affect the governing-law analysis.
13. The scope of the clause matters as much as its validity.
14. A clause covering disputes “arising out of or relating to” an agreement may reach more claims than a narrowly drafted provision.
15. Consumer and employment contracts may raise additional statutory and fairness issues.
16. Online forum-selection clauses depend in part on whether the user actually assented to the contractual terms.
17. International forum-selection clauses are particularly important because international disputes may otherwise produce substantial jurisdictional uncertainty.
18. A foreign forum can be contractually selected, subject to applicable law and enforceability principles.
19. Forum selection clauses can reduce forum shopping and litigation uncertainty.
20. A forum-selection provision should be reviewed before litigation begins because it can determine where the entire dispute proceeds.

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52. Frequently Asked Questions

What is a forum selection clause?

A forum selection clause is a contractual provision identifying the court or geographic forum in which disputes between the parties should be litigated.

What is the difference between forum selection and choice of law?

Forum selection determines where the dispute will be litigated. Choice of law determines which jurisdiction’s substantive law will govern.

Are forum selection clauses enforceable?

Generally, valid forum-selection clauses are given substantial weight and are often enforced, particularly in federal courts. Enforcement can nevertheless be denied or limited in appropriate circumstances.

What is a mandatory forum selection clause?

A mandatory clause requires litigation to occur in the specified forum, usually through language such as “exclusively,” “solely,” or “only.”

What is a permissive forum selection clause?

A permissive clause identifies a forum in which litigation is allowed but does not necessarily prevent litigation in another jurisdiction.

Can a forum selection clause establish personal jurisdiction?

A valid agreement can constitute consent to personal jurisdiction, although the precise effect depends on the language of the agreement and applicable law.

Can parties choose a federal court in a contract?

They can designate a federal court or federal judicial district when appropriate, but the agreement cannot independently create federal subject-matter jurisdiction that does not otherwise exist.

Can a contract require litigation in another state?

Yes. Subject to enforceability requirements, parties can agree that disputes will be litigated in another state’s courts.

Can a contract require litigation in another country?

Yes. International contracts frequently contain foreign forum-selection clauses. U.S. courts may enforce such clauses when the applicable legal requirements are satisfied.

Does choosing a forum automatically choose that state’s law?

No. Forum selection and choice of law are separate issues. A contract can select one jurisdiction as the forum and another jurisdiction’s law as the governing law.

Can a court refuse to enforce a forum selection clause?

Yes. Depending on the circumstances, issues such as fraud, lack of assent, unconscionability, statutory restrictions, public policy, or other exceptional circumstances may affect enforcement.

Why are forum selection clauses important?

They provide predictability. Instead of waiting until a dispute occurs to fight over where litigation should happen, the parties decide the forum when they enter the contract.

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Conclusion

A forum selection clause is much more than a sentence identifying a courthouse. It is a contractual mechanism through which parties attempt to control one of the most consequential procedural questions that can arise after a dispute begins: where will the case be litigated?

The modern legal system generally respects the ability of parties to make that decision in advance, particularly when the agreement is clear, freely made, and commercially reasonable. Supreme Court decisions such as The Bremen and Atlantic Marine demonstrate the substantial importance federal courts give to valid forum-selection agreements.

At the same time, forum selection does not eliminate the broader doctrines of jurisdiction, venue, subject-matter jurisdiction, choice of law, forum non conveniens, or public policy. Nor does selecting a court necessarily select the law that court will apply.

The most useful way to understand the doctrine is therefore to keep three questions separate:

Where can the case be heard?

Where have the parties agreed that it should be heard?

Which law should the court apply?

The first is a question of jurisdiction and venue. The second may be answered by a forum selection clause. The third is a question of choice of law.

In cross-border litigation, those three questions may point in different directions. Understanding their relationship is essential to understanding modern conflict of laws.