Venue and Choice of Law – Contractual Rendition?
In the world of construction contracts, agreeing to a "Venue and Choice of Law" clause that subjects you to the laws of a state other than where your project is located can have serious consequences. This concept, which we’ll call contractual rendition, can expose contractors and subcontractors to significant risks—particularly when it comes to broad and intermediate form indemnities. Here’s a look at how this plays out and what contractors need to know.
What Is Contractual Rendition?
The term "rendition" typically refers to transferring individuals from one country to another, often to a place with fewer protections against torture. In the context of construction contracts, contractual rendition occurs when you are forced to resolve contract disputes in a state with laws that are more favorable to your client and potentially detrimental to you.
Here’s a typical example of a Venue and Choice of Law clause found in construction contracts:
Article 59 – Venue and Choice of Law
59.1 This contract shall be interpreted in accordance with the laws of the State of Virginia, without regard to conflicts.
59.2 All claims, disputes, and lawsuits arising out of or in connection with this contract shall be resolved or adjudicated in the city of Richmond in the State of Virginia.
At first glance, this may seem harmless, especially if you're working in a neighboring state or overlook the potential consequences. But let’s consider a more detailed example to illustrate how this plays out.
A Real-World Example
You’re a contractor in Montana, working on a major industrial project for a private client. The construction contract you’re asked to sign includes Article 59—forcing all claims and disputes to be resolved in Virginia under Virginia law.
Buried within the contract is Article 33 – Indemnity:
"To the fullest extent permitted by law, Contractor shall defend at Contractor’s expense, indemnify, and hold Main Contractor and Client harmless from all claims for bodily injuries, death, and property damage, except those arising from the sole negligence of the Main Contractor or Client."
This intermediate form indemnity is extremely unfavorable to you as it makes you responsible for claims arising from up to 99% of the Main Contractor's or Client's negligence. It’s a financial landmine that you can’t even insure against fully.
However, Montana has a strong anti-indemnity statute in place that makes broad and intermediate indemnities void and unenforceable. This means that if a dispute arose and you went to court in Montana, the indemnity clause would be ruled illegal and invalid. You’d be protected from having to pay for claims stemming from the Main Contractor’s or Client’s negligence.
But under Article 59, any claims or disputes must be resolved in Virginia, a state with a much weaker anti-indemnity law that only outlaws broad form indemnities. As a result, a Virginia court is likely to enforce Article 33, leaving you on the hook for claims and defense costs—despite Montana law protecting you.
Why Venue and Choice of Law Matters
This example demonstrates how agreeing to a Venue and Choice of Law clause can strip you of the protections offered by the state in which the project is located. By agreeing to resolve disputes in a state with more lenient indemnity laws, you may find yourself facing crippling liabilities, even if you had little to no involvement in the issue at hand.
In essence, you’ve been “rendered” from a state that protects you from unfair indemnity clauses to one that tortures you with financial liability.
Protecting Yourself from Contractual Rendition
When reviewing a contract that contains a Venue and Choice of Law clause, consider why it’s included. Chances are, it’s not there to benefit you, the contractor. Instead, it’s likely included to circumvent state laws that would protect you from unfair contract terms like broad or intermediate form indemnities.
What You Can Do:
Negotiate the Venue and Choice of Law Clause: Push for the contract to be governed by the laws of the state where the project is located. If the project is in Montana, for example, it should be governed by Montana law, where strong anti-indemnity statutes protect contractors.
Understand State Laws: Familiarize yourself with the anti-indemnity and venue statutes of the state in which you’re working. Some states, like Colorado, mandate that claims be resolved in-state, making “contractual rendition” illegal.
Add Protective Language: If you can’t remove the unfavorable Venue and Choice of Law clause, negotiate to add protective clauses that limit your liability under the indemnity provisions or cap the financial exposure you face.
Final Thoughts
Contractual rendition is a hidden risk that can dramatically impact your business. The next time you review a contract with a Venue and Choice of Law clause that moves the jurisdiction to a state other than where the project is located, think carefully about why it’s there. There’s usually a reason—and it’s likely not for your benefit.
When in doubt, consult with a legal professional or construction law expert to ensure you’re not being subjected to unfair terms that could jeopardize your business.
Author's Notes:
Montana Code 28-2-2111 provides an example of strong anti-indemnity statutes, making both broad and intermediate form indemnities in construction contracts void and unenforceable.
Virginia Code §11-4.1 only outlaws broad form indemnities, leaving intermediate form indemnities enforceable.
Colorado law requires claims to be resolved in-state under Colorado law, offering protection against contractual rendition.
Always check the laws in the state where your project is located to ensure you’re aware of any anti-indemnity and venue and choice of law statutes that could protect or expose you.
By understanding the risks associated with venue and choice of law clauses, you can avoid contractual rendition and protect your business from unfair liabilities.
