For Calgary business owners, negotiating and signing contracts is often a regular occurrence. In some cases, however, parts of these contracts that are not thoroughly examined could cause major headaches in the event of a dispute.
Experts point out that during contract negotiation without a lawyer, business owners tend to concentrate mainly on those contract provisions that deal with money. Often ignored, however, are various boilerplate clauses that seem unimportant but can have serious implications if not dealt with properly. In particular, the governing law and forum clauses that determine where and under what law disagreements will be litigated are often overlooked.
In the event of a contract dispute, these clauses will suddenly gain great importance for the parties. Governing law determines which territory’s law will be applied to the dispute. Forum, on the other hand, determines where the actual dispute will be heard. Failure to negotiate a convenient forum could mean that a business owner could be traveling across the country to attend a trial. There is also the risk that the governing law may be less friendly to their side of the dispute. Often, when one party has more power at the negotiating table, they get their way as far as these clauses go. This can seriously add to the expense and risk at trial, however, if the party with less bargaining power is not careful.
Before signing an agreement, particularly one drafted by the other side, it may be helpful to have it reviewed by a lawyer with experience in business and commercial law, who may be able to help determine the most advantageous forum and governing law when negotiating the agreement. Additionally, the lawyer may be able to successfully represent that party at trial in the event of a contract dispute.
Source: The Globe and Mail, “Beware of forum and governing law clauses in commercial contracts“, Tony Wilson, June 10, 2014