Academic journal article Iowa Law Review

Interpreting Forum Selection Clauses

Academic journal article Iowa Law Review

Interpreting Forum Selection Clauses

Article excerpt

I. Introduction

Forum selection clauses-contractual provisions in which the parties agree to litigate their disputes in a specified forum-are now regularly written into commercial contracts in the United States.1 Although U.S. courts were historically reluctant to enforce such clauses, this is no longer the case.2 Modern courts will generally give effect to these provisions so long as they are not unjust, contrary to public policy, or the product of fraud or overreaching.3 This shift in judicial attitudes has generated extensive commentary relating to the enforceability of forum selection clauses.4 While important, this is not the only legal issue presented by these clauses. The courts are also routinely called upon to interpret certain words and phrases that commonly appear in forum selection clauses.5 To date, the question of how courts should interpret these clauses has attracted far less scholarly attention than the question of whether these clauses are enforceable. Indeed, it has attracted almost no attention at all.6

This Article aspires to fill this gap. Courts called upon to interpret forum selection clauses confront a singular challenge-namely, the words and phrases in these clauses are usually non-negotiated boilerplate.7 While the contracting parties will typically dicker over the identity of the chosen forum-whether litigation must proceed in New York or Texas, for example -they will rarely give much thought to the other words in their forum selection clause. This inattention presents a number of challenges. The goal of contract interpretation, generally speaking, is to give effect to the "intent" of the parties.8 The best evidence of this intent, in turn, is said to be the language of the agreement.9 When the contract language consists of non-negotiated boilerplate, however, an inquiry into the actual intent of the specific parties to a particular agreement will rarely turn up useful.10 The parties are using the same language as have thousands of other parties in thousands of other contracts. In such cases, it is difficult for the courts to credibly maintain that they are giving effect to the intent of these particular parties to this particular contract.11 They are instead assigning a meaning to the language that-they hope-is broadly in line with what most other parties using that same language would want it to mean.

In order to facilitate this interpretive task, the courts have developed a number of canons of construction that assign a presumptive meaning to ambiguous words and phrases that appear in forum selection clauses. These canons are:

1. The Canons Relating to Exclusivity. These canons help the court determine whether the parties have agreed to litigate their dispute exclusively in the chosen forum or whether they have merely consented to jurisdiction or venue in that forum. An exclusive forum selection clause stipulates that the parties must litigate in the chosen forum and no other. A non-exclusive forum selection clause merely provides that the parties consent to jurisdiction or venue in the chosen forum. In many cases, one party will argue that a clause is exclusive while the other will argue that the clause is non-exclusive. In these cases, the court must look to the precise words utilized in the clause to resolve the dispute. Over the years, the courts have developed interpretive rules to help distinguish exclusive clauses from non-exclusive clauses.

2. The Canons Relating to Scope. These canons help the court determine whether the forum selection clause is narrow or broad. Narrow forum selection clauses only select a forum for contract claims arising between the parties; they do not select a forum for tort claims or for statutory claims. Broad forum selection clauses select a forum in which all claims must be resolved regardless of whether they sound in contract, tort, or statute. In distinguishing narrow clauses from broad ones, courts across the United States have developed a dizzying array of interpretive rules, some of which conflict with one another, to determine the scope of the clause. …

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