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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 3, 2021

Forum Selection Clause Not Incorporated into Contract When Contract Only Refers to, But Does Not Expressly Incorporate the Terms of, The Agreement Containing the Forum Selection Clause

On April 22, 2021, Justice Cohen of the New York County Commercial Division issued a decision in W-Systems Corp. v. Mountain Am. Fed. Credit Union, 2021 NY Slip Op. 31393(U), holding that a forum selection clause was not incorporated into a contract when the contract only referred to the agreement containing the forum selection clause, not to the agreement’s forum selection provisions, explaining:

The threshold question on this motion is whether the forum selection provision in the MSA (to which W-Systems is not a party) requires MACU to litigate disputes with W-Systems under the License Order Forms, which contain no such provision. The Court finds that it does not.

First of all, the MSA’ s forum selection provision is not incorporated by reference into the License Order Forms. Under New York Law, incorporation by reference is appropriate only where the document to be incorporated is referred to and described in the instrument as issued so as to identify the referenced document beyond all reasonable doubt. When incorporating individual provisions from another agreement, the language used must be clear enough to demonstrate that the parties intended for a specific section to be incorporated. The fact that one agreement is subject to another, as is the case here, does not mean that all of its terms are incorporated. The question in each case is whether the contract contains clear language incorporating the terms of one contract into the other. In Krasner, for example, the First Department found that subject and subordinate to language in a secondary lease was not specific enough to incorporate sublease consent provisions from the original lease. Similarly, in US. Steel, the court held that a forum selection clause in a general construction contract was not incorporated by reference into a subcontract.

Here, as in Krasner and US. Steel, the language in the Licensing Order Forms is not specific enough to incorporate the forum selection provisions from the MSA. If the parties intended for the MSA forum selection clause to apply to the Licensing Order Forms, they could have easily done so, but they did not.

(Internal citations omitted).

New York generally enforces contracts as written, including contractual provisions specifying where a lawsuit may be brought. Here, the plaintiff’s problem was that the forum selection clause was in a different contract, a contract the defendants did not sign. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether a contract limits where an action can be brought.

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