Contract Terms Do Matter

The fine print on the back of an invoice or the language in your written contract does matter.  The District of Minnesota recently looked at personal jurisdiction over an out-of-state company who entered into a contract with a Minnesota company.  The contract had a general governing law provision but no designation of the forum to resolve disputes.  In Viracon, Inc. v. J&L Curtain Wall LLC, the Minnesota-based plaintiff entered into a contract for the sale of construction materials to a New York company.  The materials would be used for the construction of a hotel in New York.  When payment was not made for the materials, the Minnesota company sued the New York company in Minnesota.  The New York company asserted Minnesota had no jurisdiction over it because the contract related entirely to a hotel property located in New York.

The District of Minnesota held that Minnesota courts did not have jurisdiction over the New York company because the New York company did not purposefully avail itself of Minnesota courts.  The only connection to Minnesota was that the goods were to be sent from there; there was no other deliberate action by the New York company to aim its activities at or in Minnesota.  The court noted, however, that had the Minnesota company’s contract or standard terms of sale contained a forum-selection clause requiring disputes to be litigated in Minnesota, the Minnesota company would have a stronger argument for personal jurisdiction in Minnesota.   Sine the general terms governing the contract at issue contained no such forum-selection clause, there was no jurisdiction in Minnesota.

This decision illustrates the importance of forum-selection clauses in contracts, particularly for companies who engage with out-of-state entities.  A company can protect itself and force resolution of disputes in its home territory, by incorporating a provision regarding the desired jurisdiction into the company’s contracts and standard terms and conditions of sale.

See Viracon, Inc. v. J&L Curtain Wall LLC, 12-CV-2566 (D. Minn. March 8, 2013).

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