WEBINAR ALERT : June 16th, 2026 - Delegated Design in Preconstruction
Most professionals know the old real estate line: location, location, location. It turns out to be just as true for construction contracts as it is for property.
Consider a recent case involving a project owner that hired two design firms for a project. When issues arose during construction, the owner sued the design firms in state court in Brazoria County, Texas, pursuant to the forum selection clause in the parties’ contracts. The defendants then removed the case to the federal district court in Galveston, a courthouse in a different county. But the owner wanted the case back in Brazoria County state court. Whether it got its wish came down to two words in the contract: “situated in.” This article is about words like those.
A construction contract’s forum selection clause names the place for the fight nobody plans to have, and where that fight happens can shape how it goes. This article explains why the wording in your forum selection clause deserves careful reading before you sign a construction contract. It is not a deep dive into the mechanics of federal removal jurisdiction, and it is not an academic comparison of the terms “forum” and “venue.” Instead, it is a practical look at how courts actually read these clauses, so the location of a future fight is the one you intended.
What a Forum Selection Clause Can and Can’t Do
A forum selection clause makes two choices, but it makes them against a backdrop the parties do not control. The clause can state which court system the parties prefer, state or federal, and it can fix the place where a dispute should be heard. A related venue clause pins down the location within that system. What the clause cannot do is manufacture a court’s power to hear the case. Jurisdiction and venue are set by law, and a forum selection clause operates on top of that framework, not in place of it.
Parties consent to a forum and waive objections they would otherwise be free to raise, but this consent provided in the construction contract goes only so far. A federal court is a court of limited jurisdiction, so naming a federal court accomplishes nothing unless an independent basis for federal jurisdiction, such as diversity of citizenship, exists. And parties generally cannot route a dispute to a court in a state with no connection to the parties or the project and expect that court to hear it. The clause selects among the forums the law makes available; it does not create new ones.
A forum selection clause can reach the substance of a dispute too. A separate choice-of-law clause in your construction contract usually controls which state’s substantive law applies, and a court will typically honor that selection wherever it sits. But the forum still decides procedural questions under its own law. The statute of limitations is a common example, because the forum’s own limitations period usually applies even when another state’s substantive law governs the contract. And in a handful of states, a protective statute can go further still, voiding the choice-of-law clause and the forum clause together and pulling the whole dispute back under local law.
The wording of the clause also decides how much force it carries. A mandatory forum clause states that a dispute belongs only in the chosen forum. A permissive forum clause merely allows a forum without closing the others. That distinction runs through the cases and drafting considerations discussed in this article. Whether a clause is mandatory or permissive often turns on a single word.
What’s in a Name? Quite a Lot, as It Turns Out
A forum selection or venue clause is built from ordinary words, and courts read those words the way they are written. “State courts.” “Federal courts.” “Situated in.” “Of the State of.” Each one carries weight. Swap a preposition or name the wrong county and you have changed the contract, even if you did not mean to.
Return to that Brazoria County case.[1] There, the two design contracts were not silent about where a dispute would go. Each required suit in courts “situated in Brazoria County, Texas.” One contract referred to “state courts and federal courts” there, the other to “state or federal courts.” Here is the catch. There was no federal courthouse in Brazoria County in 2023 when this issue of removal was decided. The federal court that serves the area sits in Galveston, which is in Galveston County.
The defendants argued that the contracts’ mention of “federal courts” reserved their right to be in federal court. The court disagreed and sent the case back to state court. The phrase “situated in Brazoria County” was a geographic limitation, and the federal court in Galveston is not situated in Brazoria County. The reference to federal courts did not make the Galveston court a permitted venue. The court read the federal courts reference as covering the possibility that a federal courthouse might one day be built in Brazoria County. Until that day, the only courts situated in the county were state courts. The contracts labeled these provisions forum selection clauses, but it was their exclusive venue language, courts “situated in Brazoria County,” that waived the right of removal.
The lesson is that geographic words in a contract are generally given their literal, physical meaning. A clause that ties venue to a specific county will usually be read to mean courts physically located in that county. If you name a county that has no federal courthouse, you may have, in practical effect, picked a state court whether you meant to or not. Two contracts can use almost identical language and land in different court systems based on a fact as mundane as where a building sits.
Geography is one way a clause can surprise you. Word choice is another, and it can be just as decisive.
Words Have Consequences – One Preposition, Two Outcomes
A case from the Eastern District of Oklahoma makes the same point from a different angle.[2] In that case, a subcontractor sued an engineering firm in Oklahoma federal court. The engineer moved to dismiss or transfer the case to Minnesota, pointing to a clause requiring that disputes be brought “either in federal district court of the United States or the trial courts of the state of Minnesota.”
The court denied the motion. It read the phrase “of the state of Minnesota” as a reference to sovereignty, not geography. Because a federal district court is a court of the United States, not a court of any state, that phrase modified only the state-court option. It limited the state-court choice to Minnesota state courts and placed no geographic limit on which federal court could hear the case. The federal court in Oklahoma was a “federal district court of the United States,” so it was a permitted forum, and the case stayed put.
Courts have long held that the word “of” points to origin. A clause referring to the courts “of” a state is generally read to mean that state’s courts only. A clause naming the “Courts of the State of Colorado,” or the “Courts of Texas,” reaches only that state’s own courts, because federal courts proceed from the federal government, not from the state where they happen to sit.[3]
Now change one preposition and the results change. A clause requiring suit “in courts in the State of Ohio” was held to include the federal court located there, because that court is unquestionably in Ohio even if it is not of Ohio.[4] The words “of” and “in” look interchangeable in casual writing. In a forum selection clause, they are not. The forum you think you picked is only as good as the words that actually picked it.
Say Which You Mean: Mandatory or Permissive
The cases described above share a theme. Courts enforce the words on the page, not the deal a party assumed it had drafted. That is why the line between a mandatory and a permissive clause matters so much.
A mandatory clause contains clear language showing that a dispute belongs only in the designated forum. A permissive clause does less. It authorizes a forum, often by having the parties consent to jurisdiction there, but it does not bar the parties from litigating somewhere else. A clause that merely says the parties “consent to jurisdiction” in a named court is generally read as permissive. It opens a door without closing any others.
What moves a clause into the mandatory category is exclusive, obligatory language. Naming a place is not enough on its own. Naming a place and pairing it with words like “exclusive,” “sole,” or “only,” or requiring that suit “shall be brought” there, signals that the parties meant the chosen forum to be the only forum, and courts will enforce it as written.[5]
This is not a technicality. A mandatory clause is what produces a clear waiver of the right to remove a case from state court to federal court, which is what happened in the Brazoria County dispute. A permissive clause may leave that right intact and leave the door open to a forum fight the drafter thought the clause had foreclosed. If the parties intend one forum and one forum only, the clause has to say so in plain, obligatory terms.
When a Contract Clause is Not the Last Word
Even a well-drafted mandatory forum clause can be voided in some states. A number of states have statutes that void contract terms requiring an in-state construction dispute to be litigated or arbitrated somewhere else. Tennessee and Minnesota are two examples.[6] One survey of these statutes counted 28 states with provisions reaching construction contracts specifically.[7]
The pattern is worth knowing: mandatory language requiring an out-of-state forum is the language most likely to be struck down. Permissive language, however, such as a clause saying suit “may be brought in” a location, more often survives. Before you copy a forum clause from one project to the next, check the law of the state where the project sits.
What the Standard Form Says
ConsensusDocs ties the dispute to the Project. The ConsensusDocs 205 short-form owner-constructor agreement defaults its binding dispute resolution to litigation “in either the state or federal court having jurisdiction of the matter in the location of the Project,” and it makes the Project location the venue.[8] That is a sound default. By pointing to the Project rather than a named county, it sidesteps the issue from the Brazoria County case, where naming a county with no federal courthouse effectively removed the federal option. A drafter should still confirm that “the location of the Project” resolves to a single, clear place, because a project that straddles a county or state line can put the ambiguity right back.
One note on the scope of this article. The ConsensusDocs form lets the parties choose arbitration instead of litigation. This article is about choosing a court and a courtroom. It does not address arbitration, the seat of an arbitration, or how to draft an arbitration clause, each of which raises its own location questions.
Practical Drafting Considerations
Be specific about both the court system and the place.
Say which court systems are allowed, state or federal, and say where. A clause that names only a place, or only a court system, leaves a gap that a court will fill, and it may not fill it the way you expected.
Use clear mandatory language when you want exclusivity.
If the parties intend one and only one forum, say so plainly. Words like “shall be brought exclusively in” leave little room for argument. Words like “may be brought in” or a bare “consent to jurisdiction” invite a fight over whether the forum is required or merely permitted.
Check the project state for protective statutes.
If the project is in a state that voids out-of-state forum requirements, a mandatory clause pointing elsewhere may not hold up. Permissive language is more durable in those states.
Where You Fight Should Not Be a Surprise
Disputes happen on construction projects. Where they get heard should never be a surprise. The forum selection and venue clause is short, it is easy to skip, and it is one of the few provisions in the contract that can independently decide the cost and convenience of a fight before the fight even begins. A few minutes of careful reading can save months of motion practice, and real money in legal fees, spent fighting about the courtroom location instead of the merits of the case.
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The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.
[1] Buc-ee’s, Ltd. v. Bldg. & Earth Scis., Inc., No. 3:23-cv-234, 2023 U.S. Dist. LEXIS 210069 (S.D. Tex. Nov. 27, 2023) (Brown, J.) (memorandum opinion and order granting remand).
[2] Morse Elec., Inc. v. Stearns Conrad & Schmidt Consulting Eng’rs, Inc., No. 22-CV-91-JWB, 2023 U.S. Dist. LEXIS 124092 (E.D. Okla. July 17, 2023).
[3] Am. Soda, LLP v. U.S. Filter Wastewater Grp., Inc., 428 F.3d 921, 925–26 (10th Cir. 2005); Dixon v. TSE Int’l Inc., 330 F.3d 396, 398 (5th Cir. 2003).
[4] Basicomputer Corp. v. Scott, 973 F.2d 507, 510 (6th Cir. 1992).
[5] Am. Soda, 428 F.3d at 926-27.
[6] Tenn. Code Ann. § 66-11-208; Minn. Stat. § 337.10.
[7] John F. Coyle & Katherine C. Richardson, Enforcing Outbound Forum Selection Clauses in State Court, 96 Ind. L.J. 1089, 1113 tbl.2 (2021).
[8] ConsensusDocs 205, Standard Short Form Agreement Between Owner and Constructor (Lump Sum) (© 2011, 2017, rev. Oct. 2023), art. 19 (Dispute Mitigation and Resolution).