You don’t need a law degree to know this: The tricky stuff in a contract is always in the fine print, at the end of the contract.
For instance, most good contracts will invariably include a forum selection clause. This is generally a line at the end of the “Miscellaneous” paragraph that says something like: the parties to the contract agree that any action or proceeding arising under or related to this agreement shall be filed only in the United States District Court or the state courts in Nashville, Tennessee.
Of course, forum selection clauses don’t always say “Nashville,” but they do generally list the forum in a location that is: (1) convenient to the party preparing the contract; and (2) inconvenient for the other party. It makes sense, the contract drafter says, because that company doesn’t want to open itself to lawsuits all over the country. Presented with these “take it or leave it” terms, the other party often doesn’t object, no matter how burdensome the forum would be, because a party doesn’t generally sign a contract anticipating a default.
Unless, you know, they have a lawyer review the contract and warn you about the doomsday scenario. In Tennessee, these provisions are generally enforceable, as noted in a recent Court of Appeals opinion, The Cohn Law Firm v. YP Southeast Advertising & Publishing, LLC. In that case, a Memphis-based law firm filed suit against the Yellow Pages in Memphis; in response, the Yellow Pages moved to dismiss, citing page 3, paragraph 18 (titled “Miscellaneous”) of the contract, stating that all lawsuits must be filed in Georgia. The lower court dismissed the lawsuit for lack of jurisdiction and improper venue, and the appellate court agreed.
That Court wrote that: “Generally, a forum selection clause is enforceable and binding on the parties entering the contract. Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct. App. 2000). A forum selection clause will be upheld if it is fair and reasonable in light of all the circumstances surrounding its origin and application. Id. (citing Dyersburg Mach. Works, Inc. v. Rentenbach Eng’g Co., 650 S.W.2d 78 (Tenn. 1983)). A party seeking to invalidate a forum selection clause must prove that the clause resulted from misrepresentation, duress, abuse of economic power, or other unconscionable means. Id.”
The Court further wrote: “Tennessee law is clear that the party challenging the enforcement of the forum selection clause “should bear a heavy burden of proof.” Chaffin v. Norwegian Cruise Line Ltd., 1999 WL 188295, *4 (Tenn. Ct. App. Apr. 7, 1999).
The Plaintiffs argued that the contract was an “adhesion” contract, i.e. a boilerplate provision that wasn’t discussed or contemplated, and the Court ultimately rejected this, since the forum selection clause wasn’t patently unfair and had a reasonable basis.
I estimate that most contracts have these provisions in them; if they don’t, they should. A good lawyer will always consider the “worst case” scenario, even at the front end of the deal. In doing that, no lawyer worth his billable hour rate will overlook the impact of a forum selection clause.
Creditors Rights 101 