Ohio Voids Forum Selection Clauses
A common provision in construction contracts is what is known as a “forum selection clause.” A forum selection clause restricts the location where disputes between parties to a construction contract may be resolved. A typical forum selection clause states that the parties to the contract agree that they will only commence legal action against one another in the specified court, and that court has exclusive jurisdiction over the dispute. Many forum selection clauses also provide that the parties agree to waive any objection to bringing the action in the specified court based upon lack of jurisdiction or improper venue. Similar restrictions may apply in the context of alternative dispute proceedings, such as arbitration or mediation.
In negotiating construction contracts, contractors should note that a forum selection clause may result in a significant advantage to one party in resolving claims. For example, a local jury may be more sympathetic to a local company than an out of town contractor. Furthermore, litigating in a local court will be significantly less expensive than having to travel to a distant jurisdiction.
Recent legislation passed by the Ohio General Assembly now places certain limitations on the scope of forum selection clauses. House Bill 491, which takes effect in March, provides that it is against public policy to include a provision in a construction contract subjecting the contract to the laws of another state or requiring that any litigation, arbitration or other dispute resolution process with respect to a construction contract occur in another state. The General Assembly defines “construction contract” to include any contract for the design, planning, construction, alteration, repair, maintenance, moving, demolition, or excavation of a building, structure, highway, road, appurtenance or appliance situated on real estate located in Ohio. Thus, for any construction project located in Ohio, H.B. 491 makes void any contractual provision requiring that disputes be resolved in a forum outside of Ohio, or applying laws of another state to interpret the contract.
House Bill 491 is a clear statement from the Ohio General Assembly that disputes arising from projects built in Ohio should be resolved in Ohio under Ohio law.
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