How Alternative Dispute Resolution Provisions May Help

Business contract disputes are generally not fun to encounter. The disputes often interrupt the natural flow of business and can become an issue with cash flow and financial performance. How to resolve the business disputes is always something to consider.

As many business owners know, litigation can be expensive and time consuming. Sometimes, it is necessary based upon the circumstances and facts. However, if the business litigation can be resolved early and/or avoided all together, it generally can save the company unexpected expense and time consumption of the company executives.

Alternative dispute resolution as in mediation and/or arbitration has been around for years. These efforts can be a meaningful way to resolve disputes early. As is typically the case, often times mediation and/or arbitration comes after the dispute has blown up and the parties have retreated to their respective corners as they prepare to fight it out. This generally results in increased hostility between the parties which can be difficult to overcome.

There is a growing trend for businesses to look to resolve disputes early on by using a voluntary dispute resolution tool such as mediation or arbitration. This is in an attempt to resolve disputes amicably and by mutual consent. The thought process is that by identifying the issues earlier, all parties save time and expense. Drafting these types of provisions generally includes the parties to identify and designate a representative with authority to settle and the representatives will meet to work towards an agreement. If an agreement cannot be reached, the representatives may agree to select a mediator to mediate the dispute. Other provisions could be added to encourage agreement between the parties.

Thinking of how companies can reach agreements ahead of time and encouraging resolution is always a good idea.

If you have any questions of how to draft such provisions, please let me know.