Tuesday, June 17, 2008, 2:27 PM

COA rejects choice of law and forum selection clauses in contracts relating to NC real estate

Today, in Price and Price v. Miken Corporation, the Court of Appeals confirmed that choice of law and forum selection clauses in contracts concering real property located in North Carolina are invalid.

The plaintiff was a subcontractor working on a commercial development in Asheville; the defendant was a developer based in Florida. The contract at issue contained choice of law and forum selection clauses pointing to Florida. After the plaintiff filed suit in superior court, the district court dismissed for improper venue.

The Court of Appeals reversed. First, it noted that N.C. Gen. Stat. 22B-2 renders invalid any "provision in any contract...for the improvement of real property in this State, or the providing of materials thereof....if it makes the contract...subject to the laws of another state, or provides that the exclusive forum for any litigation, arbitration, or other dispute resolution process is located in another state." This statute, the Court held, controlled the case. The Court rejected the defendant's argument that N.C. Gen. Stat. 22B-3, which renders invalid forum selection clauses in contracts "entered into" in North Carolina "[e]xcept as otherwise provided in this section," was relevant and did not render unenforceable the forum selection clause at issue because the contract was "entered into" in Florida. The more specific real estate statute was directly on point, the Court held, and it prevailed over the more general and narrower provision cited by the defendants.

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