Dispute resolution provisions: What’s in your contract
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Well-drafted business contacts contain all types of key provisions, ranging from payment terms, work to be performed, and how disputes are resolved. When it comes to dispute resolution provisions in a business contract, those provisions should address where the dispute gets resolved (known as the forum or venue) and the manner in which the dispute will be resolved (such as in a court of law or in arbitration).
It is critical to ensure that these dispute resolution provisions are clear and unambiguous. If those provisions aren’t clear, it can result in costly fight about where and who gets to resolve the dispute. Obviously, something every business owner wants to avoid.
FLORIDA LAW ON VENUE PROVISIONS
In Florida, the parties to a contract can agree in advance to submit to a jurisdiction of a given court. Those forum selection/venue clauses are proper way to attempt to eliminate confusion about where disputes are to be brought and defended. Florida courts recognize that good drafting of these types of provision result in sparing the time and expensive of motions directed to venue. In Florida, Florida courts place a premium on freedom of contract and enforce such form selection/venue clauses absent in showing that enforcement would be unjust or unreasonable.
Recently, a Florida court reviewed the validity of a forum selection clause and determined that it was unambiguous, requiring venue in a state other than Florida in order to resolve the dispute.
RECENT FLORIDA CASE LAW ON VENUE PROVISIONS
In Ecovirux, defendants owned a company that marketed and distributed disinfectant spray. Ecovirux sought distribution rights of that product, and the defendants drafted a proposed distribution agreement to memorialize the business terms. That distribution agreement contained a forum selection clause that provided as follows:
This Agreement shall be governed by and interpreted in accordance with the laws of Texas. The exclusive venues for any dispute(s) arising under this Agreement (including but not limited to breach, validity, and enforceability of the Agreement), may be brought in the state and federal courts for Denton County, Texas. The parties’ consent to the personal jurisdiction of and venue in such courts for all of such cases and controversies, which include any action at law or inequity.
Shortly after the parties signed the distribution agreement, plaintiff filed suit against the defendants in Miami Dade County, Florida. The complaint alleged causes of action for fraud, conspiracy to commit fraud, negligent misrepresentation, breach of contract, and violation of the Florida Deceptive and Unfair Trade Practices Act. The claims in the lawsuit centered around allegations that defendants mispresented their ownership and effectiveness of the commercial disinfectant product which was the subject of the distribution agreement.
The defendants moved to dismiss the complaint for improper venue, relying on the forum selection clause in the distribution agreement, requiring venue in Texas. The plaintiff opposed the motion arguing that its “may be brought” language was permissive rather than mandatory, and, therefore, suit was proper in Miami Dade County. The trial court agreed with defendants, that venue was not proper in Florida, and dismissed the case with prejudice.
On appeal, the Court discussed the types of forum selection clauses and their enforceability and applicability, and the distinction between mandatory and permissive forum selection clauses. Permissive venue provisions are nothing more than a consent to venue; whereas, a mandatory forum selection clause requires the mandatory and exclusive place for venue of any future litigation.
The Court examined whether the use of the term “may” was determinative of whether the forum selecConstruction Contracts: Arbitration and Venue Provisionstion clause was mandatory or permissive. The Court determined the phrase “may be brought” does not eliminate the expressed intentions of the parties, which was to have venue in Texas.
In Florida, there are no magic words required to establish a mandatory forum selection clause. However, the language employed must reflect the parties’ clear desire to limit venue. Business owners should take care and consult with counsel when drafting forum selection/venue clauses. Doing so should eliminate any uncertainty and unnecessary costs in the event a dispute arises.