Jurisdiction, Venue and Attorneys’ Fees: Three Critical But Often Overlooked Clauses in Contracts

June 7, 2017

By A. Nicholas Falkides

Three contract clauses that can critically impact the outcome of contract dispute litigation are Jurisdiction, Venue and Attorneys’ Fees.  Yet these clauses are often overlooked, and sometimes left out, as parties focus on “the deal terms” and ignore what they consider the “boilerplate.”

Jurisdiction is the authority of a particular court to bind a particular party [such as a person, a business, or a government agency] to the court’s judgment.  Without jurisdiction an order or judgment rendered against a party is unenforceable, in some cases even after a jury trial.

Jurisdiction is important for several reasons.  First, the law may differ from one jurisdiction to another.  Second, the cost of litigating in another jurisdiction is often much higher than litigating in the party’s “home” jurisdiction.  Third, a party may have a “home grown advantage” in its local jurisdiction that it loses in a foreign jurisdiction.

Venue is the geographical location where a lawsuit is, or can be, brought.  Venue rules generally prevent a lawsuit from being brought in a location that has no connection to the parties or the dispute; and a lawsuit brought in the wrong venue is subject to involuntary transfer to a proper venue, or even dismissal.

Venue is important because it is usually more expensive, and more difficult, to litigate in a distant venue than it is in a nearby venue; and the cost difference often impacts a party’s litigation strategy.

An attorneys’ fees clause gives a party to a lawsuit – typically the prevailing party – the ability to recover its “reasonable” attorneys’ fees in the lawsuit.  Attorneys’ fees clauses are legally enforceable in New York.  While some New York courts refuse to enforce attorneys’ fees clauses on principle, their existence in a contract often gives a party leverage in settlement negotiations.

Attorneys’ fees clauses are important because they give the “wronged” party some chance of recovering its reasonable attorneys’ fees, which can be substantial in contract dispute cases.  Here too this ability can influence a party’s litigation strategy, and impact settlement.

The jurisdiction, venue and attorneys’ fees clauses play a small role in contracts that are completed without dispute.  However, when a dispute arises, the situation can reverse itself with these clauses playing a large role.  They are key factors which influence [a] the court(s) in which the “wronged” party can (or cannot) bring suit, [b] the geographical location(s) which are eligible venues for the lawsuit and [c] whether or not the party can make a claim to recover attorneys’ fees.

A well-drafted contract will address, rather than ignore, these important clauses; and an experienced business person will ensure that their attorney pays attention to these issues.