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86 Nw. U. L. Rev. 700 (1991-1992)
My Way and the Highway: The Law and Economics of Choice of Forum Clauses in Consumer Form Contracts

handle is hein.journals/illlr86 and id is 720 raw text is: Copyright 1992 by Northwestern University, School of Law Printed in U.S.A. Northwestern University Law Review Vol. 86, No. 3 PUBLIC POLICY MY WAY AND THE HIGHWAY: THE LAW AND ECONOMICS OF CHOICE OF FORUM CLAUSES IN CONSUMER FORM CONTRACTS Lee Goldman I. INTRODUCTION Parties entering into contractual relations seek to reduce and allo- cate risks. One type of provision that may achieve these goals is the fo- rum selection clause. Such a clause stipulates that any litigation arising from the contract must be brought exclusively in a designated forum. The clause reduces uncertainty and the risk of litigation over the proper forum for suit should unforeseen problems develop. The chosen forum, however, may not be equally convenient to both parties to the contract. Nevertheless, the costs of litigating in the forum are allocated in advance and this allocation may be reflected in the contract price. For some parties, the use of forum selection clauses is so convenient that they prefer to include them in every transaction they enter. By guar- anteeing that all litigation is in the same state, not only is predictability enhanced, but efficiencies may be created through consolidation of ac- tions and reliance on the same local counsel. By including such clauses in standard form contracts, transaction costs are reduced. The law has recognized the obvious benefits of forum selection clauses by routinely endorsing their use.1 A conflict arises, however, when one party to the transaction lacks full information and equal bar- gaining power. In particular, when such clauses are included in standard form consumer contracts there are reasons to believe neither the parties' 1 See, e.g., M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Moses v. Business Card Express, 929 F.2d 1131 (6th Cir. 1991); Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372 (7th Cir. 1990); Heller Fin. v. Midwhey Powder Co., 883 F.2d 1286 (7th Cir. 1989); Instrumentation Assocs. v. Madsen Elec., 859 F.2d 4 (3d Cir. 1988); Manetti-Farrow, Inc. v. Gucci Am., 858 F.2d 509 (9th Cir. 1988); Hodes v. S.N.C. Achille Lauro ed Altri-Gestione, 858 F.2d 905 (3d Cir. 1988), cert. dismissed, 490 U.S. 1001 (1989); In re Diaz Contracting, Inc., 817 F.2d 1047 (3d Cir. 1987); Hoffman v. Natl Equip. Rental, 643 F.2d 987 (2d Cir. 1981); Lexington Inv. Co. v. Southwest Stainless, Inc., 697 F. Supp. 139 (S.D.N.Y. 1988); Wilkinson v. Carnival Cruise Lines, Inc., 645 F. Supp. 318 (S.D. Tex. 1985); LFC Lessors, Inc. v. Pearson, 585 F. Supp. 1362 (D. Mass. 1984); Gaskin v. Stumm Handel GmbH, 390 F. Supp. 361 (S.D.N.Y. 1975).

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