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Using dispute resolutions clauses in contracts

Business entities entering into an agreement may include clauses for dispute resolution. While this may seem aggressive or cynical, these commonly used clauses can provide a helpful map to resolving a dispute between the two sides during the time of the contract. As an insightful article at Mediate.com pointed out, basic language not tailored to fit the needs of the arrangement will often do nothing to help resolve the matter, but dispute resolution (DR) clauses that address the needs of the contract can be extremely helpful.

Better than going to court?

Litigation is commonly a slow and expensive process. Even when there are courts set aside to specifically address certain areas of law, DR may still be preferable to court. There are several reasons for this:

  • DR clauses provide a flexibility to address the needs of the agreement.
  • DR clauses can enable the two sides to work out a decision of their creation rather than abiding by a ruling.
  • The courts will not redesign the contract if that is necessary.
  • The courts conduct their hearing in public, which may be something both sides wish to avoid.
  • An equitable DR negotiation may preserve the business relationship.

What is in a DR clause?

Depending on the contract, business or corporate law attorney can provide and insight into crafting an effective DR clause as part of the contract. This can include such important details as:

  • Method for notice of dispute
  • Time frames for response
  • Steps for an escalation if the other side does not respond
  • Determining who would oversee the dispute
  • Tailoring different dispute approaches to different issues

Getting the needed outcome

An effective dispute resolution clause works towards a solution that addresses the needs of those involved. Whether it is a straightforward affair to be handled through arbitration or a multi-tiered matter that may eventually end up in court, the idea is to get the two sides talking to find a fair and equitable solution.

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