Dispute Resolution: 7 Typical Provisions for Contract Negotiations

Dispute Resolution:  7 Typical Provisions for Contract Negotiations

When parties sit down to hammer out their commercial contracts, often left to the end as an afterthought is a dispute resolution mechanism. The optimal time to create strategies to avoid the time, expense, and adverse business consequences of traditional litigation is before any dispute arises. In every business relationship there is the potential for conflict, and when such conflicts arise, there is a need to be able to resolve disputes relatively quickly, fairly, and cost-effectively.

Planning in the very beginning is critical to this effort. Providing a well-thought-out dispute resolution process in the agreement before any dispute arises allows both parties to avoid the difficulties of negotiating a resolution in the midst of a dispute that may have created a lack of trust on both sides.

It is a common, cost effective dispute resolution plan to provide for negotiation and/or mediation in advance of arbitration or litigation. However, unless carefully drafted, this can be merely a tactic for delay where one or both parties lack real interest in settlement. By setting strict time frames ,“good faith negotiations” will not be drawn out.

Typical provisions for “good faith” dispute resolution negotiations will consist of the following:

1. Require participation by those with authority to settle the controversy and who are at a higher management level than those with direct responsibility for administration of this Agreement.
2. Require written notice and response within fifteen days.
3. The notice and response shall include with reasonable particularity a statement of each party’s position.
4. Within 30 days, the participants shall meet at a specified or mutually acceptable time and place.
5. Unless otherwise agreed in writing, negotiations shall end at the close of this first meeting.
6. Everything done in the course of the negotiations is confidential, privileged, and inadmissible as evidence in court.
7. During the negotiation phase, the statute of limitations is tolled, and for 15 calendar days thereafter.

If the parties do not wish to negotiate in advance of arbitration or litigation, but do wish to mediate, the typical provisions will include the following:

1. All disputes shall be submitted for mediation.
2. Mediation organization is designated.
3. Commenced by written demand, setting forth the subject of the dispute and the relief requested.
4. Cooperation on selection of mediator and scheduling.
5. Cost sharing
6. Confidentiality
7. Time limits for mediation, such as, either party may initiate litigation/arbitration following the initial mediation session or after 45 days from the date of filing the mediation demand, whichever occurs first.
8. Statute of limitations during this period and for 15 days after is tolled.

The parties negotiating an important and exciting agreement do not like to think about disputes. That is the lawyer’s job.

Gary Schuster is a partner practicing arts and entertainment law, business law, and nonprofit law. He can be reached by phone at 845-764-9656 and by email.