Any contract can have a provision specifying that legal notices or other communications arising out of or related to the contract must be served on a designated agent for service of process. For example, a loan agreement can state that any lawsuits arising out of the agreement must be brought in a particular state, with the company getting the loan being required to appoint an agent for service of process in that state. Or where a contract involves an entity from a foreign country, that entity may be required by the other contracting parties to appoint an agent for service of process in a U.S. state.
Why do companies need an agent for service of process?
An agent for service of process is a person or entity authorized to receive legal documents and other official notices and forward them to the companies for which it serves as agent.
An agent for service of process is appointed for a couple of reasons. Most corporations, LLCs, LPs, and other statutory business entities are required by the business’ entity laws to appoint an agent for service of process in the state. This agent for service of process is commonly known as a “registered agent”.
There are also state and federal statutes or regulations other than the business entity laws that require companies to appoint an agent for service of process. Applicants for certain state licenses, for example, may need to appoint an agent for service of process in the state. Federal laws require interstate motor carriers and pilots without a United States address to appoint an agent for service of process. These are sometimes referred to as “special agencies”.
“Contract agencies” (as they are sometimes called) are a third kind of appointment of an agent for service of process. Although often seen in loan agreements, indentures, guaranty agreements, and franchise agreements, in fact, the parties to any agreement can require service of process to be made on a particular individual or company.
One main reason the parties include a contract agency clause is the same reason other clauses, such as choice of law or choice of forum, are included in the contract; it provides predictability and helps avoid litigation over procedural issues.