September 28, 2022
When signing a contract people focus on the goods or services to be provided, the price, and time that the goods will be delivered or the services performed. Most people do not look at or skim over the boilerplate at the end of the contract. However, that it the first thing I look for when a client has a contract dispute that he or she wants to litigate.
There are several common provisions among contract boilerplate that can have a significant impact on litigation including those involving arbitration, consent to jurisdiction in a place other than where a party normally could be sued, choice of forum, choice or law, and attorneys’ fees for the party who is successful in litigation. Arbitration provisions often require that a dispute be submitted to binding arbitration. Although there are benefits to arbitration, there also are downsides such as having to pay up front fees for arbitrators and very limited appeal rights. A consent to jurisdiction in a distant place if one is sued for an alleged breach of a contract or having to bring a case in a distant place if one wants to sue the other party can have a significant financial impact on the costs of litigation as can a provision providing for attorneys’ fees for the prevailing party. Given that the laws in most states are similar, a choice of law provision usually does not make a big difference, but sometime it can. For example, in a contract governed by Texas law, the plaintiff who prevails in contract litigation can recover attorneys’ fees even if there is not an explicit attorneys’ fee provision in the contract.
The courts sometime do not enforce things like arbitration or choice of forum provisions. But, they almost always do. It is better to be aware of and negotiate these kinds of things upfront rather than fighting them when a dispute arises. Having to litigate in a distant place and the risk of having to pay the other side’s attorneys’ fees often can be the tail that wags the dog in a dispute.