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Be Aware of Forum Selection Clauses in Vendor Agreements

Date: 07/01/2009 | Category: Business Transactions | No comments

When dealing with high cost technology software and equipment expenditures and investments‚ many business owners sign what appears to be a standard "purchase order" form or invoice without giving thought to the "small print legal terms" included in the agreement.  One such "small print" legal term that is commonly overlooked is a "forum selection clause".

Forum selection clauses basically define and restrict what states a party may or may not commence a lawsuit.  In technology and equipment contracts many vendors include a forum selection clause that favors the vendors' home state.  That is‚ if your vendor's home state is in California‚ a forum selection clause contained in your purchase order form may restrict your ability to sue that vendor only in the state of California.  So‚ even if you are a New York corporation and the equipment and services are delivered to you in New York‚ if you need to sue that vendor‚ you may be required to commence the lawsuit in California.

Recommendation: have legal counsel review all "large ticket" purchase order forms.  If you choose not to have corporate counsel review these agreements then‚ at a minimum‚ before you sign anything make sure you review the fine print and cross-out any provision that restricts your ability to sue the vendor.  Cross-out forum selection clauses.

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