Forum selection clauses are found in most commercial contracts. As the name suggests, such clauses specify where the parties to a contract will litigate should any disputes arise between them. More than simply providing the convenience of home field advantage to the party within the chosen forum, these clauses present a distinct disadvantage to the out-of-state party who loses time and money in traveling to the foreign jurisdiction. Often, even the prospect of having to litigate in another state is enough for an aggrieved party to forgo litigation.
These provisions, however, present less of an issue in North Carolina where, as a general rule, forum selection clauses are relatively worthless. By statute, any provision in a North Carolina contract stipulating an out of-state forum for contract disputes is void and unenforceable. N.C.G.S. § 22B-3 provides:
Except as otherwise provided in this section, any provision in a contract entered into in North Carolina that requires the prosecution of any action or the arbitration of any dispute that arises from the contract to be instituted or heard in another state is against public policy and is void and unenforceable. This prohibition shall not apply to non-consumer loan transactions or to any action or arbitration of a dispute that is commenced in another state pursuant to a forum selection provision with the consent of all parties to the contract at the time that the dispute arises.
The key here is to remember that the statute only applies to contracts “entered into in North Carolina.” Pursuant to basic contract law principles, the contract will be considered “entered into in North Carolina” if the last act required for the contract to be formed took place in North Carolina. If the contract was entered into in another state, North Carolina courts will look to that state’s laws to determine whether the forum selection clause is enforceable. Generally, the “last act” in entering into a contract is the execution of the last signature. Accordingly, a good practice is to be the last signatory to any proposed contract, thereby ensuring the applicability of N.C.G.S. § 22B-3.
Finally, keep in mind that the statute applies only to forum selection clauses specifying an out-of-state forum. Clauses requiring that a lawsuit be brought within North Carolina are perfectly fine and will remain unaltered by the statute.