The reality is that at the time most people enter into a contract, they are excited about a new business venture and optimistic about what the future of this new relationship will hold.  Most people do not believe that they will actually have to enforce or seek protection under any of the provisions of the contract.  That is why many people never have an attorney review the contract and, honestly, many people never even read the contract themselves before signing it.  Scary, but true.

We, of course, frequently hear from Georgia business owners after a promising business venture has gone south.  The first issue in these situations is, if we need to file a lawsuit, legally, where should the lawsuit be filed?  The general rule is that a lawsuit needs to be filed in the state where the defendant resides.  So if a Georgia business owner wants to sue a South Carolina business, that lawsuit probably needs to be filed in South Carolina.  That means extra hassle, expense, and irritation for a Georgia business owner who already feels they have suffered an injustice.  

There are statutory exceptions to this rule, some of which are discussed below, but the best way to avoid a dispute over jurisdiction is with a simple paragraph in all contracts that says that in the event a dispute arises, the parties agree that all lawsuits will be brought in Georgia (specifying the county and court) and that the contract will be interpreted under Georgia law.  Litigation over which state is the proper state to bring a lawsuit (known as “jurisdiction”) can be very costly and time consuming and proper jurisdiction must be determined before the merits of the case can be addressed.        

There is a statute in Georgia (O.C.G.A. § 9-10-91) that provides, in relevant part, that a lawsuit can be brought in Georgia over a nonresident if the nonresident:

1. Transacts any business within Georgia;
2. Commits a tortious act or omission in Georgia;
3. “Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state;” and
4. Owns, uses, or possesses any real property situated within Georgia. 

This statute is known as the “Long-Arm Statute.”  You may be able to imagine how complicated it can become to try and seek shelter under this law.  It is an extremely fact-intensive analysis.  

The best course of action is to avoid the long-arm statute and litigation over jurisdiction.  Simply specify in the contract where any disputes will be litigated.