CLAUSE: Legal State of Mind
“Thisshall be governed by and construed under the laws of the state of __________. The parties agree that any legal proceedings arising out of this contract shall be litigated in any court of competent jurisdiction in the state in which the Hotel is located.”
EFFECT: Toto, You're Not in Kansas Anymore
The choice of law and venue clause may become significant in the event of a serious dispute between the hotel and the group because it spells out two things: under what state's laws the contract language will be interpreted in the event of a dispute; and where a lawsuit can be filed and litigated.
Each state has statutes that addressand a body of case law that has developed from prior contract disputes resolved in that state (common law). This means that identical contract disputes litigated in two different states could have completely different outcomes, based on each state's laws and case precedents.
For example, say a group is being sued by a hotel. Where a lawsuit can be brought and defended is a legal question of jurisdiction. To oversimplify this issue, it is important to know that a group can always be sued in its own backyard (where the group is located and/or incorporated, for example) or where the contract is to be performed. One might say that the contract is to be performed in the state in which the hotel is located — where the meeting is to be held. Without “choice of venue” language in the contract, a dispute might be litigated either where the group is or where the hotel is.
This clause specifies that the dispute will be litigated where the hotel is located. The pros: The group might be subject to jurisdiction there anyway, if that is where the contract is to be performed. Also, any witnesses or documents required for resolution of the dispute may already be located at the hotel (if the dispute is over something that happened on site, for example). The cons: The laws and case precedents may be more favorable to the group in the group's home state or in another state that would have jurisdiction if this language were not in the contract. Also, travel expenses to and from the hotel's locale to bring or defend a lawsuit could be costly.
Tyra W. Hilliard, Esq., CMP (firstname.lastname@example.org) is a meeting industry attorney and Assistant Professor of Event and Meeting Management at The George Washington University in Washington, D.C.
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