Businesses often negotiate price, performance obligations, indemnification, and termination rights in detail. The provision identifying where a future lawsuit must be filed may receive far less attention. Yet that provision can determine whether the parties litigate in New Jersey, New York, another state, or federal court and whether they spend substantial time and money fighting over venue before reaching the merits.
A recent New Jersey Appellate Division opinion, Varda Chocolatier Inc. v. Shamban, 2026 WL 100060 (App. Div. 2026), illustrates this point. The decision is unpublished and therefore not precedential. However, it offers practical guidance for companies drafting agreements and for litigants deciding how and when to enforce forum-selection rights.
The Dispute in Varda Chocolatier Inc.
The case arose from an asset purchase agreement involving a chocolatier business. The agreement provided that disputes arising from or relating to the agreement, related transaction documents, or the contemplated transactions “may be instituted” in federal or New York state courts located in New York City. It also stated that each party irrevocably submitted to the “exclusive jurisdiction” of those courts.
The so-called transaction included a separate lease for real property in Elizabeth, New Jersey. The operative agreement was amended to state that the property would be purchased separately from the remaining assets. When the relationship broke down, the buyer filed suit in New Jersey. The seller commenced two separate proceedings in New Jersey concerning possession of the property and rent. The matters were consolidated.
The parties then litigated in New Jersey for more than two years, including discovery, mediation, and motion practice. The trial court sua sponte revisited the forum-selection issue, concluded that the contractual clause required litigation in New York, and dismissed the consolidated case without prejudice.
“May” Did Not Make the Clause Optional
On appeal, the buyer argued that the phrase “may be instituted” made the clause permissive: New York was an available forum, but not the exclusive one. The Appellate Division disagreed.
The court examined the clause as a whole. Although it used the word “may,” it allowed a choice only between specified federal and New York state courts. More importantly, the parties had “irrevocably” submitted to the “exclusive jurisdiction” of those courts. Taken together, the Appellate Division determined that the language reflected an intent to require covered disputes to proceed in New York.
The drafting lesson is straightforward. Courts do not interpret isolated words in a vacuum. A clause that mixes seemingly permissive wording with exclusivity language can still be mandatory. Businesses that intend to require a particular forum should say so directly and consistently by using terms such as “shall,” “must,” and “exclusive,” rather than leaving the issue to later interpretation.
One Clause May Not Reach Ever Claim
The Appellate Division nevertheless vacated the dismissal and remanded the matter because it determined that the trial court treated the consolidated litigation as a single package without determining whether the clause applied to each individual claim.
That distinction mattered. Some claims arose under the asset purchase agreement, while others concerned a separate lease and real property in New Jersey. The litigation also included tort-based claims. The appellate court directed the trial court to analyze the scope of the forum-selection clause claim by claim.
This is a common risk in multi-document transactions. An asset purchase agreement, lease, guaranty, promissory note, employment agreement, and restrictive covenant may each contain different or conflicting choice-of-law, forum-selection, or arbitration provisions. When a dispute spans several documents, inconsistent clauses can produce fragmented proceedings in multiple forums.
A Contractual Right Can Be Waived
The appellate court also directed the trial court to consider waiver. After the initial motion to dismiss was denied, the parties continued litigating in New Jersey for approximately two years. They engaged in discovery, mediation, and motion practice before the forum issue returned.
Under New Jersey law, waiver may be inferred from conduct. The relevant analysis is fact-sensitive and can include the delay in seeking enforcement, motions filed, the amount of discovery completed, whether the issue was preserved in pleadings, proximity to trial, litigation strategy, and prejudice to the opposing party.
For litigants, the practical message is just as important as the drafting lesson: a forum-selection clause should be evaluated immediately when a complaint is received. A party that participates extensively in litigation before pressing the issue may create a waiver argument even if the contractual language itself is otherwise enforceable.
Practical Steps for Businesses
Businesses can reduce the risk of a costly threshold fight by taking several steps:
- Coordinate dispute-resolution provisions across every document in the transaction.
- State clearly whether the selected forum is exclusive or merely permitted.
- Define the clause’s scope broadly enough to address contract, tort, statutory, and related transaction claims if that is the parties’ intent.
- Consider whether the chosen court can hear all likely claims and grant all necessary relief.
- Review forum-selection, arbitration, and choice-of-law provisions as soon as a dispute or demand arises.
- Preserve and assert any forum objection promptly, before substantial litigation activity occurs.
The Bottom Line
Forum-selection provisions are not boilerplate. They can shape the cost, leverage, timing, and strategy of a commercial dispute. Careful drafting at the beginning of a transaction, and prompt action when litigation begins, can prevent the parties from spending years litigating where they will litigate.
To find out more about author Boris Peyzner and his areas of practice, click here.