The term “shrink wrap agreement” refers to the purchase agreements attached to shipped products, usually bound by shrink wrap (plastic wrapping) that contain terms and conditions.

What Is a Forum Clause?

A forum clause, officially known as a “forum selection clause,” is a provision that can be included in a contract. It authorizes the parties to choose which state and the court system will manage legal matters in the event of a dispute. For example, a forum selection clause might state: “Any dispute between the parties to this contract shall only be decided by a court located in Orange County, California.”

Forum selection clauses are also occasionally referred to as a “venue selection clause,” “choice of court clause,” or “jurisdiction clause.” They are often associated with a “choice of law clause,” a contract provision that defines what law will govern the contract. However, the two clauses should not be confused.

To separate the two, recognize that the former decides where a case will physically be decided, and the latter dictates which state law will apply. For example, a forum clause may tell you that you need to litigate an issue in Orange County, California if that is the most convenient place for both parties. In contrast, a choice of law clause may require that the case be decided following the laws of Nevada, even though the court is in California.

In addition, forum selection clauses can either be non-exclusive or exclusive. An exclusive or mandatory forum selection clause requires all cases to be litigated in a specific forum, such as “only in a federal court.” On the other hand, a non-exclusive or permissive forum selection clause allows the parties to be looser in choosing whether to litigate in federal or state court.

Some reasons why a party may want to consider inserting a forum selection clause in their next contract include:

  • If it would be convenient for the parties and significant components of the case (e.g., it is where witnesses reside, a company’s headquarters is stationed, the majority of evidence is located, etc.);
  • If they are familiar with the laws and court system in a certain area;
  • If the courts in a specific jurisdiction tend to decide in a way that is favorable for their business;
  • If most of their clients or business deals with matters that federal courts must decide; or
  • If a court system has lots of experience handling specific types of cases (e.g., the Western
  • District court in Waco, Texas, is known for overseeing most of the nation’s patent infringement lawsuits).

What Type of Contracts Contain Forum Clauses?

Forum clauses can be found in a variety of contracts. In general, the most common types of contracts in which forum selection clauses are used include the following:

Commercial contracts
Commercial contracts refer to a broad category of contracts that govern transactions between consumers, merchants, and businesses. Commercial contracts make up most litigation involving businesses and breach of contract issues. Some commercial contracts include licensing agreements, supply of goods and services, and lease agreements. Here are some of the others:

Employment contracts
Employment contracts are a significant subcategory of commercial contracts. These include agreements made between employers, workers, and prospective hires. Many employment contracts contain forum clauses that require resolving future disputes only through mediation or arbitration.

Franchise agreements
Franchise agreements often contain forum selection clauses. Such clauses are included to let franchisees know that a franchisor will not be traveling wherever the franchisee is located to resolve a dispute. For example, Dunkin Donuts has franchises all up and down the east coast, and therefore a franchisor could be subject to lawsuits from Maine to Florida. A forum clause prevents that from happening.

Construction contracts
One other subtype of commercial contract known for having forum clauses is construction contracts. Both general contractors and subcontractors work on many construction projects. If a subcontractor has an issue with a general contractor, the subcontractor will need to resolve the matter in the forum that the general contractor chooses.

As is evident from the above examples, most forum clauses will be found in a commercial or business contract. However, this does not mean they cannot be featured in other contracts. Commercial contracts happen to make up the majority of contract lawsuits, hence why so many commercial contracts contain forum selection clauses.

Who Is Held Responsible for a Breach of an Implied Warranty?

The law implies warranties only when the merchant or seller generally deals in selling the products or goods. Implied warranties do not apply to an individual who sells a product once. For instance, a warranty is implied when an automotive shop sells a car tire because the automotive store deals with car tires regularly. A warranty is not implied when a grandmother sells her old toaster unless the grandmother deals in the sales of old toasters routinely. Therefore, whether a breach of warranty has happened can be complex and fact-specific.

Can a Seller Disclaim Implied Warranties?

For a seller to bypass possible liability for an implied warranty, the seller needs to inform the buyers, in writing, that the seller would not be responsible if the product is defective or does not perform as the buyer believed it would.

What is the Problem With Shrink Wrap Agreements?

The controversy around shrink-wrap agreements is that the terms of the agreement cannot be read until the consumer has paid and accepted the package and has opened the product by taking off the shrink wrap, which then states that opening will constitute acceptance of the terms.

Are Shrink Wrap Agreements Enforceable?

Currently, the status of shrink wrap agreements is unclear. Courts have been split as to whether a consumer consents to the terms in a shrink-wrap agreement since he pays for the product and goes to open the package but does not know the terms until he opens the package to read them.

Shrink Wrap Agreements and EULA

When software is purchased, it is usually shrink wrapped. The terms and conditions are made available either inside the container or during downloading, accompanied by an End User License Agreement (EULA). EULA is a software license that also acts as a contract between the producer and the user of the computer software to specify the limits of use granted by the owner. The EULA is in effect immediately at the time of purchase, regardless of how or when it was installed.

Recent court decisions have challenged the use of EULAs within shrink wrapped software, and multiple complaints have forced some software companies and retailers to accept returns of opened software or provide EULAs on their websites for consumers to read before purchasing.

Should I Consult With an Attorney if I Have a Shrink Wrap Agreement Claim?

Because the law surrounding shrink wrap agreements is uncertain, contacting an experienced contract attorney can help you make certain what your rights and remedies are when you are a party to a shrink wrap agreement, and you believe you may have a claim. Use LegalMatch to take the first steps towards resolving your legal issues today. An attorney can provide you with legal advice and can represent you in court as needed.