One of the areas in which Gordon Law assists its clients is identifying problems before they occur and then either preventing or minimizing them once they do occur. You can practice this important lesson by including a dispute resolution clause in all of your contracts. If you do not have such a clause, the only forum to resolve your differences will be in a courtroom through litigation. Litigation is time-consuming and expensive. In Las Vegas, it can take up to three years, on average, for a case to get to trial.
Although all businesses are optimistic that they will never have a legal dispute, the unfortunate reality is that within the life of your business you will likely have several. Recognizing that reality makes it that much more important for you to create the best path for your business to resolve those disputes.
A dispute resolution clause will set forth how the parties to a contract will resolve those inevitable disputes. You can specify which method will work best for which type of contract. Generally, such clauses will set forth whether the parties must submit a matter to mediation or arbitration (or sometimes both) before taking the matter to litigation. It is vital for you to understand the differences between these tools in order to fully negotiate such a clause within your contract.
Black’s Law Dictionary defines mediation as, “A private, informal dispute resolution process in which a neutral third party, the mediator, helps disputing parties to reach an agreement.” In mediation, the mediator can formally or informally assist the parties in identifying the nature of the dispute and try to resolve it. A well-written dispute resolution clause will determine how the mediator will be selected and how the parties will pay for such mediation. Furthermore, the contract should spell out the timing for mediation and whether it is a precondition for any other efforts at dispute resolution.
Arbitration is more formal than mediation, but generally less formal that litigation. An arbitrator acts as a fact-finder and, similar to a judge, will issue a ruling as to which party prevails. Although generally the formal rules of evidence are relaxed in arbitration, it is a hearing wherein each side presents its case to the arbitrator. Just as with litigation, depending on how the parties agree, there can be discovery (depositions and written discovery) prior to the arbitration hearing. A well-written dispute resolution clause will define whether the arbitration is binding or non-binding (if it is binding, the decision of the arbitrator is final and neither party can thereafter litigate the claim); how the arbitrator is selected; whether there will be one arbitrator or a panel of arbitrators; which rules of arbitration will be utilized; and who will pay for the arbitration.
Litigation is when you take a dispute to trial. The process can be long and very expensive. A decision will ultimately be rendered by a judge or jury. Depending on your contract, you may have the right to seek mediation; arbitration and litigation. Also, at any point during the dispute, you may settle with the other side.
As we have discussed in other blogs, everything is a negotiation. It is vital that you remember to include dispute resolution in your negotiation. Please contact Gordon Law if you need assistance with contract negotiations, contract drafting or resolution of your disputes.