Why an Exclusive Venue Provision (Forum Selection Clause) is Vital for Small Business Contracts in Florida
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An exclusive venue provision, or commonly referred to as a forum selection clause, is an integral part of every small business contract. Including an exclusive venue provision in a small business contract is extremely important for a small business that provides labor, materials or services to clients located in different counties throughout Florida (or other states). Part 1 of this blog series provided a general overview of exclusive venue provisions and the purpose behind including an exclusive venue provision in all small business contracts. Part 2 of the series seeks to evaluate the types of venue provisions and how to properly draft an exclusive venue provision.
The reason this blog uses the term “exclusive venue provision” as opposed to “forum selection clause” is because, as discussed below, to be effective, a venue provision must use words of exclusivity.
The enforceability of exclusive venue provisions
In the absence of a showing that an exclusive venue provision is unreasonable or unjust, a court is required to enforce an exclusive venue provision. See Manrique v. Fabbri, 493 So. 2d 437, 440 (Fla. 1986); Aqua Sun Management, Inc. v. Divi Time Ltd., 797 So. 2d 24, 24-25 (Fla. 5th DCA 2001); Management Computer Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627, 631 (Fla. 1st DCA 1999). The Florida Supreme Court has emphasized that the test for determining whether an exclusive venue provision is unreasonable or unjust is not mere inconvenience or additional expense. Manrique, 493 So. 2d at 440 n.4. Rather, “it should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust, or unreasonable to hold that party to his bargain.” Id.
Mandatory versus permissive venue provisions
Whether a venue provision is binding on the contracting parties depends on the language used in the contract. In considering whether a venue provision is permissive or mandatory, the general rule is that a venue provision will be considered permissive where it lacks words of exclusivity. See Shoppes Ltd. Partnership v. Conn, 829 So. 2d 356, 358 (Fla. 5th DCA 2002) (citing Sanwa Bank, Ltd. v. Kato, 734 So. 2d 557, 562 (Fla. 5th DCA 1999)).
Permissive venue provisions
If a venue provision merely authorizes the filing of a lawsuit in a particular forum, the provision will likely be considered a permissive venue provision and will not be binding on the parties. See Michaluk v. Credorax (USA), Inc., 164 So. 3d 719, 721 (Fla. 3d DCA 2015) (finding a venue provision to be permissive and not mandatory where the venue provision stated: “This Agreement shall be governed by and construed in accordance with the Laws of Malta and each party hereby submits to the jurisdiction of the Courts of Malta as regards any claim, dispute or matter arising out of or in connection with this Agreement, its implementation and effect.”); Shoppes Ltd. Partnership, 829 So. 2d at 357 (finding a venue provision to be permissive and not mandatory where the venue provision stated: “Applicable Law. This instrument shall be construed in accordance with the laws of Massachusetts. The Guarantor hereby consents to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts.”); Regal Kitchens, Inc. v. O’Connor & Taylor Condo. Constr., Inc., 894 So. 2d 288, 290 (Fla. 3d DCA 2005) (finding a venue provision to be permissive and not mandatory where the venue provision stated: “Any litigation concerning this contract shall be governed by the law of the State of Florida, with proper venue in Palm Beach County”). “Permissive forum clauses constitute nothing more than a consent to jurisdiction and venue in the named forum and do not exclude jurisdiction or venue in other forums.” Shoppes Ltd. Partnership, 829 So. 2d at 358.
Mandatory venue provisions
A venue provision is mandatory if the plain language used by the parties indicates that the venue selected by the parties is the exclusive venue for litigation regarding the contract. See Michaluk v. Credorax (USA), Inc., 164 So. 3d at 722; Golden Palm Hospitality, Inc. v. Stearns Bank Nat. Ass’n, 874 So. 2d 1231, 1236 (Fla. 5th DCA 2004). “Absent words of exclusivity, a forum selection clause will be deemed permissive.” Michaluk, 164 So. 3d at 722.
For example, exclusive venue provisions have been found enforceable where the venue provision states or clearly indicates that any litigation must or shall be initiated in a specified forum. See Golf Scoring Sys. Unlimited, Inc. v. Remedio, 877 So. 2d 827, 828 (Fla. 4th DCA 2004) (finding a venue provision to be mandatory where the provision provided: “This Agreement and the rights and obligations of the parties shall be governed by and construed in accordance with the laws of the State of Florida. The parties hereto consent to Broward County, Florida, as the proper venue for all actions that may be brought pursuant hereto.” (emphasis added)); Signtronix, Inc. v. Annabelle’s Interiors, Inc., 260 So. 3d 1186, 1186 (Fla. 1st DCA 2018) (finding a venue provision to be mandatory where the provision provided: “The parties expressly consent and submit to the jurisdiction of the Courts of the State of California and agree the proper forum and venue for any and all suits, actions or other proceedings arising out of this agreement are the State or Federal Courts located in Los Angeles County, California, and the parties expressly waive any objection to venue in such Court.” (emphasis added)); Travel Exp. Inv. Inc. v. AT&T Corp., 14 So. 3d 1224, 1226 (Fla. 5th DCA 2009) (holding that a venue provision was mandatory where it provided: “The parties consent to the exclusive jurisdiction of the courts located in New York City, USA.” (emphasis added)); World Vacation Travel, S.A. de C.V. v. Brooker, 799 So. 2d 410, 411 (Fla. 3d DCA 2001) (holding that a venue provision was mandatory where it provided: “both parties agree and accept to be subjected to the jurisdiction and competence of the Administrative Authorities and Courts of the city of Cancun, Municipality of Benito Juarez, in the State of Quintana Roo, Mexico, and the Federal Consumer Office, forsaking any other jurisdiction which either party may claim by virtue of its residency.” (emphasis added)); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 3 (1972) (construing a venue provision to be mandatory where it provided: “Any dispute arising must be treated before the London Court of Justice.” (emphasis added)).
Conclusion on this type of forum selection clause
Every small business contract should include an exclusive venue provision that provides the sole and exclusive venue for resolution of disputes. This will undoubtedly save the small business unnecessary costs and attorneys’ fees.
In drafting a venue provision that is exclusive (i.e., mandatory and not permissive), the drafter must include words of exclusivity. This is because when a court is asked to uphold an exclusive venue provision, the court will look for language indicating exclusivity. As such, a properly drafted exclusive venue provision will include word such as “must” or “exclusive” or “solely” or some other language indicating exclusivity. See Golf Scoring Sys. Unlimited, Inc., 877 So. 2d at 828 (“the proper venue”); Signtronix, Inc., 260 So. 3d at 1186 (“the proper forum and venue”); Travel Exp. Inv. Inc., 14 So. 3d at 1226 (“the exclusive jurisdiction”); Brooker, 799 So. 2d at 411 (“forsaking any other jurisdiction”); M/S Bremen, 407 U.S. at 3 (“must be”). Having the word “shall” without any other words of exclusivity is not enough. Michaluk, 164 So. 3d at 722.
Having discussed how to properly draft an exclusive venue provision, part 3 of this series discusses the different types of attorneys’ fees provisions.
Read other blogs from this series: