Agree to Disagree: Dispute Resolution Methods in a Contract

On Behalf of | Mar 26, 2021 | Business Law

One of the most common and important components in a commercial contract is guidance on how the parties will resolve any disputes that arise throughout the life of the agreement. Dispute resolution clauses can provide valuable direction in a difficult situation, but people often overlook them or underestimate their value.

Ways to resolve commercial disputes

The primary goal of a dispute resolution clause is to dictate how parties will address disputes related to financial expectations, missed deadlines, non-performance, and the like. Without direction, arguments can stretch on without adequate or fair resolutions until parties wind up in litigation.

To avoid this, a dispute resolution clause might specify:

  • The timing for resolving disputes and an escalation clause if a resolution cannot be reached;
  • A requirement for mediation;
  • A requirement to submit valuations to experts;
  • The preference for arbitration over court trials

This article offers additional examples of dispute resolution clauses.

The impact on your business

If you do not have a dispute resolution clause in your contracts, or if you don’t know what yours says or what it means, you could wind up making costly concessions or missteps if a conflict arises. You might exhaust resources in your business unnecessarily, leaving you without critical finances or staff.

Understanding the dispute resolution guidelines can make it easier and faster to make decisions and reach agreements that keep the relationship or project moving forward.

Business disputes can happen for any number of reasons. Having a plan in place to resolve these conflicts can keep them from disrupting your business and derailing a commercial relationship.