A forum selection clause is a part of a contract that specifies where the parties will fight out any disputes that arise between them. This typical example comes from the User Agreement at eBay:
You agree that any claim or dispute you may have against eBay must be resolved by a court located in Santa Clara County, California. You agree to submit to the personal jurisdiction of the courts located within Santa Clara County, California for the purpose of litigating all such claims or disputes.
Nowadays, forum selection clauses are especially common in contracts made over the internet... and for good reason. A website can be used by just about anyone in the world, and can theoretically cause a dispute with anyone anywhere in the world. If someone from Tajikistan gets screwed over in an eBay deal, do you think eBay will really want to hire a lawyer in Tajikistan to fight it out?
In the past, these clauses weren't enforceable most of the time. Even though there were many cases where they would be fair and economical (such as where the two parties were located far apart and wanted to pick a neutral venue in the middle), courts just didn't like to give up their jurisdiction to take cases. Nowadays, though, courts uphold such clauses all the time. In the United States, the big shift came in 1972 when the Supreme Court ruled (The Bremen v. Zapata Off-Shore Co.) that such a clause would be enforceable unless the defendant could "meet the heavy burden of showing that its enforcement would be unreasonable, unfair, or unjust."
That last bit could be troublesome for e-business. Let's face it—do any of you eBay users out there know that you're required to sue in Santa Clara County? You signed up for your account without even looking at the User Agreement, didn't you? I mean, I didn't read that thing; it's boring as hell.
However, eBay and its ilk can rest assured that the Supreme Court is on their side, thanks to a later decision: Carnival Cruise Lines, Inc. v. Shute (1991). That decision enforced a forum selection clause written on the back of a cruise ship ticket. So long as the forum is being chosen for convenience, and not merely to discourage lawsuits, it will hold up in U.S. courts. On the other hand, eBay probably couldn't force you to sue them in Alaska unless they were headquartered there.
Although these clauses are generally valid, it is possible to get an obstructive clause thrown out in court if you make the right argument. Forum selection clauses are governed by the same rules as every other contractual provision; you can't force a forum onto someone through fraud or duress, for instance. A consumer can also escape a forum selection clause by suing the company under another legal theory—tort, for instance. And it is sometimes possible to get such a clause ignored as an unconscionable term of a adhesion contract, particularly in certain consumer-friendly states like California,
Then there's a story told by one of my professors, who skipped right around the following clause:
You consent to the resolution of any dispute under this Agreement in a court in New York City.
Because, after all, the language wasn't exclusive; it just said that New York was a valid option. Nothing to stop the end user from suing in, say, Guam.
Laws vary around the world, of course. In the European Union, for instance, the Brussels Convention provides that member state nationals are bound by the selection of any member state court in a contract: Irish and British parties can agree to a forum in Greece, for instance (maybe they want some sun).