In the recent case, Rieth-Riley Construction Co., Inc. v Ecopath Contracting LLC, the Michigan Court of Appeals highlighted the importance of being specific in drafting contract terms. In that case, two companies entered into a contract relating to a construction project. When Ecopath allegedly breached the contract, Rieth-Riley brought suit in a Michigan court. Ecopath moved to have the case dismissed based on a forum-selection clause in the contract choosing Arizona as the jurisdiction for contract disputes.
The trial court agreed with Ecopath and dismissed the case. However, the Michigan Court of Appeals overturned the decision based on the plain language of the clause. The Court found that in the clause, although it says that both parties submit to the jurisdiction of Arizona, there is no language to show an intent that Arizona have exclusive jurisdiction. The Court explained that the contract did not use restrictive language such as “exclusive jurisdiction” or “sole jurisdiction.” Furthermore, the contract did not specify that a party shall or must bring any disputes in Arizona courts. The Court held that, under a plain language reading of this clause, litigation would be proper in Arizona, but parties are not barred from pursuing litigation elsewhere.
As the Court said in this case, “parties must live by the words of their agreement.” A contract will almost always be interpreted based on its plain language meaning. This is why it is often important to be as specific as possible when drafting a contract.
This blog was written by law clerk, Laura Barrera.
