Contracting Basics: Why Boring Things Like Venue and Jurisdiction Matter

In the last 12 months, my firm helped our clients close transactions and manage litigation in Maryland, New York, New Jersey, Connecticut, Florida, Delaware, Pennsylvania, Virginia, Texas, and Washington State — all from our sole office location in Hunt Valley, Maryland.    We’re hardly alone.

Today, geographic boundaries are becoming less and less relevant to businesses of every size and description.  With that globalization (or at least “Americanization”) comes the uncertainty of collection.  It is interesting that in an era where electronic communication is so commonplace as to jeopardize the two century old institution that is the U.S. Postal Service, the written contract — often complete with real, live signatures — has if anything gained in importance.

This fact was brought home to me yet again when consulting with a client concerning her company’s $20,000 claim for arising out of work performed for a North Carolina firm.  The Purchase Order described the work, named the price, and outlined the payment and delivery terms.  And while my client thought it was sufficient at the time, she now realizes that she has no chance to recoup her attorney’s fees, will not realize any interest on the overdue payment, and worse yet, has to travel to North Carolina in order to chase her money.

Every contract.  Allow me to repeat…every contract…should state where suit (or arbitration) must be filed in the event of a dispute.  These provisions may be called “Dispute Resolution” or even the technical, legal terms of  “Venue” or “Jurisdiction.”  However called, the language must not only provide which state law governs the contract, but also which courts will have “jurisdiction” or power of review over any claims.  Had this provision — two sentences at most — been present in my client’s purchase order, her customer would have to come to her in order to defend the claim, rather than force my client to throw good money after bad traveling to her delinquent customer’s home state.

Lesson learned.

(If you have a contract question…or horror story…send it in.  It may prove useful to others or just serve as a source of amusement in a Schedenfreud sort of way.)

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