Behind The Lines: Jurisdiction and Venue
In pop culture, there's a cliche in movies where the kids get together and talk about where they're going to fight.
Meet me at the flag pole after school.
Jurisdiction and venue are the contract version of this discussion. They're the language in the contract that says where a fight is going to occur.
Jurisdiction is a way of identifying what courts will have the technical, legal ability to hear a case. Venue is a way of determining what specific court the case should be heard in. Let's make this simpler.
For a contract that is entered into in Illinois, between two Illinois companies, for services to be performed entirely in Illinois, if a dispute occurs, any Illinois state court likely has jurisdiction (the legal ability to hear the case). If the dispute occurs in Batavia, Illinois and both companies are from Batavia, then venue is probably appropriate in the Kane County Circuit Court (the local state court). While a state court down in Cairo, Illinois may also have jurisdiction, it doesn't make sense to have the parties travel across the state to litigate their dispute...so venue is a study of where the case should be heard.
While these questions can be neat and tidy where both parties are in the same location, what happens when they're not in the same city? What if the vendor is in Chicago and the customer is in Rockford? If a dispute arises, where should it be heard...downtown, or out in Rockford? Or what if the vendor is in Chicago and the customer is in Wisconsin...which state's courts hear the dispute?
We address this issue by inserting language in our contracts indicating where disputes will be heard. For a business in Batavia, Illinois, we might say something like this:
In the event of a dispute arising out of the performance of this Agreement, the Parties agree that jurisdiction and venue shall be exclusively fixed in the Sixteenth Judicial Circuit Court of Kane County, Illinois.
That language will go a long ways towards ensuring that you can litigate a dispute in a courthouse that will be geographically convenient to you, rather than having to drive across the state (or multiple states) to litigate.
But is that language enough? It depends on your circumstances. We may need to insert language indicating the agreement of the parties that the contract is governed by Illinois law, and is being entered into in Batavia, Illinois at your home location. We may have to address claims that can only be brought in federal courts, and explain where those cases will be heard.
Jurisdiction and venue language are critical to nearly every business. I recently worked with a new client...a small company that did not have this language in their terms and conditions. An out-of-state customer made a purchase, and later made some terribly unreasonable claims. When the discussion between the business and customer took a turn for the ugly, the customer threatened to file a lawsuit in their home state. Based on the facts of this particular case, it wasn't a slam-dunk that we would be able to force the lawsuit to happen locally, because we had no contract language in our corner. The potential of having to defend a lawsuit in a different state, far away, ended up being a significant factor for my client to evaluate in considering how to resolve the case...and it was a factor that was entirely avoidable if my client had a good, comprehensive agreement in the first place. Suffice it to say that after we resolved the claim, our next project was enhancing the quality of their agreements (and addressing jurisdiction and venue was high on the list of changes).
Do your agreements protect your interests and help you manage potential risk and cost? Contact me and we can review how to better protect you: 630/292-4023 or firstname.lastname@example.org