Dispute resolution procedure: Overview, definition, and example
What is a dispute resolution procedure?
A dispute resolution procedure is a method outlined in a contract for resolving disagreements between the parties involved. It typically includes steps for negotiating, mediating, or arbitrating disputes in order to avoid lengthy or costly litigation. The procedure is designed to provide a clear, structured approach for addressing conflicts and ensuring that both parties can resolve issues in a fair and efficient manner.
For example, a contract might specify that any disagreements between the parties must first be addressed through negotiation, and if that fails, through mediation or arbitration.
Why is a dispute resolution procedure important?
A dispute resolution procedure is important because it provides a clear roadmap for handling conflicts, reducing the likelihood of escalation. Without such a procedure, disputes could lead to costly and time-consuming legal battles. Having a predefined process helps both parties know how to address issues in a way that is efficient, fair, and cost-effective. For businesses, this can save time, money, and resources, while also preserving relationships between the parties involved.
Understanding dispute resolution procedure through an example
Imagine two businesses enter into a contract to collaborate on a marketing campaign. If a dispute arises over deliverables or timelines, the contract includes a dispute resolution procedure that requires the parties to first attempt to resolve the issue through negotiation. If negotiation doesn’t work, they agree to engage in mediation, and as a last resort, they would go to arbitration.
In another example, a supplier and a retailer have a disagreement about product quality. Their contract includes a dispute resolution procedure that starts with a review of the issue by both parties, followed by mediation, and, if needed, arbitration. This ensures that the dispute is handled promptly and without going to court.
An example of a dispute resolution procedure clause
Here’s how a dispute resolution procedure clause might appear in a contract:
“In the event of a dispute arising under this Agreement, the Parties agree to first attempt to resolve the dispute through good faith negotiation. If the dispute is not resolved within 30 days, the Parties shall engage in mediation. If mediation is unsuccessful, the dispute shall be resolved through binding arbitration in [Insert Location].”
Conclusion
A dispute resolution procedure is essential for managing conflicts in a structured and efficient way. By including a dispute resolution clause in a contract, businesses can avoid unnecessary legal battles and ensure that disagreements are addressed through fair and cost-effective methods. This helps preserve relationships and ensures that disputes are resolved in a timely manner.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.