Part 1: A Guide to Alabama Contracts – Forum Selection Clauses

Effective contract drafting requires a precise understanding of how specific provisions operate under state law. This article serves as the first installment in my ongoing series analyzing the fundamental components of Alabama contracts. Throughout this guide, I will systematically evaluate standard contractual provisions, detail their legal mechanisms, and explain their strategic utility within business agreements. This initial post examines the enforceability, application, and structural importance of forum selection clauses in Alabama.

What is a Forum Selection Clause?

A forum selection clause, also known as a prorogation clause, is a contractual provision where parties agree in advance on the specific court or geographic location where any future disputes regarding their contract will be resolved. These are typically pre-dispute, pre-commencement clauses.

These clauses generally come in two forms:

• Mandatory: Dictates that a specific forum has exclusive jurisdiction over the litigation (e.g., “disputes shall be resolved exclusively in…”).
• Permissive: Consents to jurisdiction in a specific forum but does not exclude the possibility of litigating in other venues.

Because they are contractual in nature, they are construed like any other contract term. If there is ambiguity in the text, courts generally construe the clause most strongly against the party that drafted it.

Forum Selection vs. Governing Law

It is important to distinguish a forum selection clause from a governing law (or choice of law) clause. While both should be drafted together, they serve different functions.

• Forum Selection Clause: This provision dictates where the lawsuit takes place physically and which court system will hear the dispute. For example, a clause might state, “Disputes shall be resolved in the state courts of Lauderdale County, Alabama.”
• Governing Law Clause: This provision dictates whose laws apply to interpret the contract and determine the rights of the parties. For example, a clause might state, “This agreement shall be governed by the laws of Alabama.”

While the selected forum and the governing law state can legally be different, it is highly discouraged. Disconnecting the two can force a court in one state to apply the complex substantive laws of another, inviting conflict-of-law disputes. Drafting both provisions to specify the same state increases predictability and the likelihood of enforcement.

Are They Enforceable in Alabama?

The general rule for forum selection clauses in Alabama is that they are presumptively valid and routinely enforced.

Alabama state courts will enforce “outbound” forum selection clauses, or clauses directing litigation to another state, by declining personal jurisdiction over the matter, provided the clause is just and reasonable. Alabama courts regularly uphold these clauses even if they require Alabama residents to litigate in jurisdictions where they have never been, such as Florida, Missouri, or New York.

These clauses apply to both state and federal courts. Furthermore, a forum selection clause applies not only to breach of contract claims but also to any claims or theories related to the contract that sound in tort.

State vs. County Enforcement – An outbound forum selection clause can enforce jurisdiction down to a specific out-of-state county (e.g., Greene County, Missouri). However, regarding internal state matters, contractual provisions attempting to establish an intrastate venue (a specific county within Alabama) that would not otherwise be proper under the venue statutes are generally unenforceable.

Subject Matter Jurisdiction – A forum selection clause cannot confer or divest a court’s subject matter jurisdiction. Consequently, parties cannot use a forum selection clause to force a high-dollar lawsuit into a small claims court simply to artificially cap damages.

When Will a Court Refuse Enforcement?

An Alabama court will enforce the clause unless the challenging party can establish that doing so would be unfair or unreasonable. A clause may be invalidated under the following conditions:

• Fraud or Undue Influence: The contract was affected by fraud, undue influence, or overweening bargaining power. To defeat the clause based on fraud, the fraud must have been directed at the inducement of the forum selection clause itself, not just the contract as a whole.
• Serious Inconvenience: The chosen forum is so gravely difficult and inconvenient that the challenging party would effectively be deprived of their day in court. Simply having to travel to another state is not enough to meet this high hurdle.
• Claim Splitting: Enforcing the agreement requires a plaintiff to split claims between an action in Alabama and an action in the designated forum.
• Conflicting Clauses: Legally related co-defendants are inextricably intertwined but have conflicting forum selection clauses.
• Public Policy: The clause violates a strong public policy expression by the Legislature, such as the Alabama Heavy Equipment Dealer Act or Amendment 884 of the Alabama Constitution.

A lack of class action availability in the designated out-of-state forum is not a valid excuse to invalidate the clause.

Waiver and Unread Contracts

Can these clauses be waived? Yes. The right to enforce a forum selection clause can be waived by the party who originally had the right to enforce it.

• Plaintiffs waive their objections to a lack of proper venue by voluntarily commencing their actions in a different court.
• Defendants waive their objection by failing to assert it at their first opportunity. Under Rule 12(h), a defendant must raise this objection in a pre-answer motion (like a Rule 12(b)(3) motion to dismiss) or in their first responsive pleading. Substantially invoking the litigation process in the “wrong” forum for a protracted period also constitutes a waiver.

Can you be bound if you didn’t read the contract? Yes. Merely signing a form document containing a forum selection clause binds you to its terms. Failing to read a contract or understand its terms does not void the effect of your signature, absent active fraud, deceit, or misrepresentation regarding the document’s contents.

Strategic Drafting Considerations

When drafting forum selection clauses in Alabama, it is highly recommended to pair them with a governing law clause and a severability clause. A severability clause ensures that if the forum selection provision is struck down for violating public policy, the remainder of your business contract remains enforceable.

If you need to restrict dispute resolution to a non-judicial setting, a forum selection clause is the incorrect tool. You must instead draft an arbitration clause, which is governed by the Federal Arbitration Act.

Schedule a Contract Consultation

Properly drafted contracts prevent unpredictable litigation and unnecessary expenses. If you need assistance drafting, reviewing, or enforcing forum selection clauses in Alabama, it is essential to work with an experienced attorney to ensure your business interests are fully protected.

Contact my office today to schedule a consultation regarding your business agreements and litigation strategies.

Disclaimer: This post is for informational purposes only and does not constitute legal advice. Each case is fact-specific. If you are wanting to analyze your case, please contact our office to discuss your specific situation.