The jurisdiction and venue clause is one that many businesses skip over – most often because no one wants to think they will ever need to enforce their contracts or that a client will be so upset they decide to sue. While this clause is usually found towards the end of most agreements, it can have a profound (and expensive) effect on your ability to enforce an agreement. “Jurisdiction” is a court’s power to hear a legal case and make an enforceable decision. “Venue” is where the court is located, geographically.
Imagine, for example, that you want to sue someone because they never paid you for work you performed. Virginia Code section 16.1-77 says that Virginia’s General District Courts typically have the power (jurisdiction) to hear civil cases with $25,000 or less at stake. But there is a General District Court in every County and City in Virginia! Can you file a lawsuit in any of them? Probably not. Virginia Code sections 8.01-261 & 262 describe in which County or City (venue) a plaintiff may sue a defendant. The purpose of jurisdiction and venue laws is to make sure that a plaintiff files a lawsuit in a place where a defendant can travel and make his or her case without prejudice. In other words, these laws are meant to help ensure a fair trial.
But, why does all this matter to you? First, it matters if you are ever sued or need to sue. Second, it matters because in addition to laws defining appropriate jurisdiction and venue, contracts can determine where a lawsuit may be filed. Contract provisions can specify a court where any dispute about the contract will be heard. This means that, if push comes to shove, and you need to sue, contract terms may limit your options about where you can file your lawsuit. Likewise, if you are sued by someone else, contract terms may control where you must go to defend yourself.
Here is an example of a “jurisdiction and venue” clause, taken from Google’s Terms of Service in December of 2018:
The laws of California, U.S.A., excluding California’s conflict of laws rules, will apply to any disputes arising out of or relating to these terms or the Services. All claims arising out of or relating to these terms or the Services will be litigated exclusively in the federal or state courts of Santa Clara County, California, USA, and you and Google consent to personal jurisdiction in those courts.
Does this mean, you, a Virginia citizen have to go all the way to California if you want to sue Google? It very well might. This could be expensive and time consuming. But, from Google’s perspective, Santa Clara County, California is the most convenient place to defend a lawsuit. There is also value in the fact that Google’s attorneys are likely familiar with Santa Clara’s court system and procedures.
In addition to convenience and familiarity, there are other reasons parties may want to specify a certain court to hear contract disputes. Some courts have a reputation for favoring plaintiffs or defendants, based on the local culture and population. It is also thought that if a company has a positive presence in an area, by, for example, providing jobs or participating in charitable community events, a jury may view the company more favorably compared to a Joe Schmoe out-of-towner who had to come to California to file his lawsuit.
At the end of the day, where you file or defend against a lawsuit can matter and it can be a valuable point of contract negotiation. Make sure to look out for the words “jurisdiction” and “venue” when drafting or reviewing your business contracts. Though no one likes to think about a contract going south and needing to go to court, a little forethought can prevent a big headache later.
If you have questions about how jurisdiction and venue contract provisions can affect your business, contact us and let’s talk through how best to protect you and your business.