Updated 2026-05-19

Forum selection

The contract's rule for where a lawsuit or dispute must be handled.

Why it matters

A forum selection clause in a factoring agreement specifies where disputes must be litigated, often a jurisdiction favorable to the factor. When the forum is a distant state, the cost of enforcement or defense increases substantially. This asymmetry can effectively deter sellers from pursuing legitimate grievances against the factor, since the cost of litigating in another state may exceed the amount in dispute. Courts generally enforce commercial forum selection clauses when the parties had equal bargaining power, though some states provide limited consumer-like protections for small businesses.

How it appears in contracts

Forum selection clauses appear at the end of the factoring agreement in the Miscellaneous or General Provisions section, often adjacent to the governing law clause. The clause typically specifies both the state and the specific county or court. Sellers should confirm that the chosen forum is accessible and that its courts are familiar with UCC Article 9 and factoring disputes. Some states have passed laws limiting forum selection clauses in commercial contracts; sellers should consult counsel to determine whether the clause in their agreement is enforceable under their operating state law.

Related terms

• Governing law
• Jury waiver
• Attorney fees
• Event of default