Does your contract contain a dispute resolution clause? If so, do you go to court, mediation or arbitration? What does it mean?

Before you sign a contract, take a look at the section regarding dispute resolution.  This usually is a section which discusses what happens when a dispute arises between the parties and where and how they resolve their issues.  Meaning, if we don’t agree or their is a breach of contract do I just sue, mediate or arbitrate.  Most attorneys who write contracts don’t litigate or spend much time thinking through the dispute resolution process or they write in such a way where it benefits only their client.  Its up to you to know and seek legal advice so that you know what your signing and how you will resolve disputes when they arise.

Just so you are aware of the differences between going straight to court, mediating or arbitrating disputes, I am going to simplify for the sake of the length of this article what each means as you could go into depth in each of these areas.  If you don’t have a clause of any kind regarding dispute resolution in your contract and someone breaches the contract, the aggrieved party does have recourse, he/she can simply file a lawsuit in court.  Lawsuits are expensive and they usually mean that the parties are no longer working together and are in a major dispute which can only be resolved by a judge or a jury.  Sometimes its prudent to include a mediation provision which allows the parties to meet and have a mediator try and resolve the dispute before going forward into court and filing a lawsuit.  The beauty of mediation is that it is non-binding, the parties can reach a resolution regarding the dispute at mediation or agree to disagree.  If they agree at mediation the parties may move forward working together and the contract may go forward.  Arbitration is a replacement for the use of the public court system, basically the parties can stipulate in a dispute resolution clause that they elect to have disputes determined by an arbitrator, depending on the complexity it may be one or three arbitrators.  Some of the advantages in using arbitration are that the disputes remain private, the arbitrator or arbitrators are chosen by the parties and usually have knowledge of the subject matter, and the arbitrators are more efficient and actively involved in the resolution of the matter.  Obviously, this comes with a price, generally arbitration is more expensive than the public court system as the parties pay for the services of the arbitrator, his staff, and the arbitration company which governs the arbitration.

Its important to review and receive the proper advice when it comes to the dispute resolution section of a contract, pay attention to the law that is applicable, whether the law of your state applies, where venue or the place where the dispute will be litigated is stipulated, sometimes it may be thousands of miles away, talk to your lawyer regarding whether your agreement should include mediation, civil court, arbitration or a combination to better suit resolution of disputes that may arise.  The best time include language for dispute resolution is before the dispute arises!!!

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