Differences of opinions are but obvious, in human relationships. Similarly, franchise relationships, are not free from disagreements and disputes. However, Forum Selection Clause in a franchise agreement defines the rule of resolving disputes. Find out mo
Disputes and differences are an intrinsic part of every franchise fraternity. As an entrepreneur aspires to take the franchise route to expand his business and zeroes down on a particular brand, occurrence of any dispute is the last thing on their mind. But differences of opinion are natural to any business. However, derogatory situations can be a source of failure for any franchise business. The disputes in franchising usually arise due to breach of contract or misrepresentation of the franchise agreement. So, in order to avoid such conflicts, Forum Selection Clause is a must for every franchise agreement. Let us find out about Forum Selection Clause and its role in resolving the disputes between the franchisor and his franchisees.
What is Forum Selection Clause?
The Forum Selection Clause in a franchise agreement allows both the franchisor and his franchisees to resolve their disputes in a specific forum. In other words, it sets out a process under which both the parties can seek resolution to their dispute/ conflict along with the venue where the conflict will be resolved. The franchise selection forum basically includes two clauses:
Options for dispute resolution
When deciding the Forum Selection Clause, it is important that the clause fits the need of both the parties. It should be valid and applicable in that particular country or state. There are various methods opted by both the parties to resolve the dispute that arises between them. These methods include:
Ensuring the enforceability of the clause
When a dispute between parties in different jurisdictions arises under a commercial contract, the Forum Selection Clause will often be the first point of reference for parties and their solicitors looking to understand what rights and remedies are available to them, where and under what law. As Rod Young, ED, DC Strategy says, “The franchisor should consider the forum selection clause separately for each jurisdiction where he wishes to expand his business in, with reference to the local laws and any franchising regulations. While one cannot guarantee the enforceability of a forum clause, parties can generally take comfort from a clear well-constructed provision prepared by a specialist legal adviser.”
Usually, it is the legal rules of the country involved and the international conventions under which the ruling of the national court is submitted. But in case, none of the conventions apply, the internal rule of the specific nation decides the validity of the Forum Selection Clause.
In short, for the sake of commercial certainty, it is advisable to include a Forum Selection Clause in every franchise agreement, irrespective of the nationwide or international franchising business offering.