Negotiating contracts can be downright messy.
By the time you agree to major business terms, you may not want to argue the “small stuff.”
Jurisdiction, for example: that’s just meaningless lawyer-talk, you think. Or venue: whatever that is, it can’t be important, you say. And choice of law: the law is the same everywhere, right?
Jurisdiction—which court has the authority over a particular defendant; venue—where a lawsuit occurs; and choice of law—which state’s (or federal) law applies, are three critical but often overlooked contract provisions.
Ignoring them in contract negotiations could lead to a procedural and/or substantive nightmare in a subsequent contract dispute.
The law generally allows contracting parties to agree to the applicable jurisdiction, venue and law in a dispute, so long as the court/locale/law has some reasonable connection to the parties and the dispute.
Jurisdiction, venue and choice of law provisions are customarily raised when one contracting party is located outside of Wisconsin.
If, for example, you contract with a California company to ship Wisconsin product to California, the California company’s contract may require that contract disputes be resolved by (jurisdiction) and in (venue) a California court.
Even if your company has minimal contacts with, and no witnesses in, California.
If you don’t object, and if a dispute later arises, you may be forced to sue or be sued in California, not Wisconsin.
That would be disruptive, overly time-consuming, and expensive.
For that reason, you might want the contract to specify that a Wisconsin court has exclusive jurisdiction over the parties, and venue must be in Wisconsin, if a lawsuit arises regarding the contract.
You can’t negotiate that provision, however, unless you know what venue means and how important it is.
While jurisdiction and venue can be procedurally difficult and expensive, choice of law can substantively hurt your case.
A Wisconsin statute, for example, requires written notice, with specified information, when a patent right is claimed or asserted against a Wisconsin company.
Assume your Wisconsin company licenses a patent from a Massachusetts patent owner.
If the contract requires Massachusetts law, and if Massachusetts has no patent notification law, you will lose the protection of Wisconsin’s notification law, with no other law to take its place.
Some statutes, like the Wisconsin Fair Dealership Law, prohibit parties from using venue or choice of law to contract out of its requirements. There, a court will likely disregard a conflicting contract provision.
Further, contracts can be interpreted differently depending on their precise wording.
For example, the fact that a party “agrees” to an Ohio court’s jurisdiction over it does not mean that Ohio is the “only” court with jurisdiction.
Similarly, the fact that a case “can” be venued in Nevada does not necessarily mean that it “cannot” be located elsewhere.
Likewise, the fact that Minnesota law “may” apply does not always mean that Florida law “can never” apply.
So, when negotiating a contract, add jurisdiction, venue and choice of law to your checklist.
Otherwise, you may end up suing or being sued in California, or making your case under Maine law.
