News & Noteworthy

Authored - NJ Contract Law Update - "Floating" Forum Selection Clauses
MARCH 21, 2013 | Windels Marx - Commercial Litigation

When entering into a contract where an assignment is foreseeable--such as an equipment lease or banking transaction--can the bank or leasing company require the obligee to submit to litigation (or presumably arbitration) in an unknown forum--such as in the case of Professional Solutions v. Cregar, ____ N.J.Super. ___, 2013 WL 709009 (N.J.App.Div. Feb. 28, 2013). That clause provided:

  • If this Lease is assigned by Lessor, You consent to personal jurisdiction and venue in the State or Federal Court located where the Assignee's Corporate Headquarters is located. This is known as a floating forum selection clause.

The short answer is ostensibly "maybe"; definitely in some States and not in others; but, as a practical matter, perhaps "always". In this regard, if the bank or lessor proceeds first in the chosen forum state and obtains a judgment, the fact that New Jersey may dislike such clauses would not prevent that judgment from being enforced under the Full Faith and Credit Clause of the United States Constitution, or the Uniform Enforcement of Foreign Judgment Act, N.J.S.A. 2A:49A-25 et seq., if the original forum State approves such clauses.

In sum, assuming Professional Solutions remains 'the law', clients should be made aware that floating forum selection causes may well be enforced.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

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