The current unpredictability of business relationships between Canada and the United States has caused concern for several Québec companies. To ensure greater certainty and stability when dealing with US business partners, commercial contracts can include clauses stipulating how and where eventual disputes will be resolved.
Provisions like these allow the parties to specify the law governing the contractual relationship and whether the dispute will be heard before the court of a specific jurisdiction or proceed by way of arbitration. These clauses can provide a degree of predictability, as courts are generally required to respect the will of the parties and their choices, subject to a few limited exceptions.
Choice of forum and arbitration clauses
The parties to a contract can stipulate that the courts of a specific country, province or state or, alternatively, an arbitrator of their choice will have exclusive jurisdiction to hear any dispute arising from the contract. Clauses such as these must be clear in scope, indicate the exclusive jurisdiction of the province/state or designated arbitrator, and specify that the parties must comply with these provisions. The parties must also provide valid consent to be bound by them.
It is important to note that exchanging specifications, purchase orders and invoices that include such clauses is sufficient to establish consent, even in the absence of a blanket contract.
Applicable law clause
The applicable law chosen by the parties is generally the law of the province or state they have designated as the appropriate forum. Whatever law is chosen in this way—either through an express clause or implicitly based on the contents of the contract—will govern its interpretation and resulting effects, and will be applied by the judge or arbitrator hearing the case.
In other words, it is in the interests of Québec companies to choose a jurisdiction and law that are advantageous to them not only concerning the applicable substantive and procedural law, but also considering the costs and conditions for accessing the designated court or arbitrator.
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If you are planning to enter into a commercial contract with a US partner, these are important issues to consider because they will determine how and in which forum you will be enforcing your rights should a dispute arise.
If you already have a binding contract with a US partner, you might want to review the terms of the contract or the documents exchanged during your business dealings to determine whether they contain these types of clauses. You can also consult your legal advisor to learn about possible impacts and any solutions you can implement as needed.