Informal resolution: Overview, definition, and example
What is informal resolution?
Informal resolution is a way to settle disputes without going to court or using formal legal procedures. It involves open communication, negotiation, or mediation to resolve conflicts quickly and cost-effectively. Businesses often use informal resolution to handle contract disputes, workplace issues, or customer complaints before escalating to legal action.
For example, if two business partners disagree over profit distribution, they might have a direct discussion or bring in a neutral mediator to help them reach an agreement instead of filing a lawsuit.
Why is informal resolution important?
Informal resolution saves time, money, and relationships by avoiding lengthy legal battles. It allows businesses to handle disagreements privately, maintain goodwill, and find practical solutions that work for all parties involved.
For SMBs, informal resolution is particularly valuable because legal disputes can be expensive and time-consuming. Resolving issues through discussion, mediation, or written agreements helps businesses stay focused on their operations while minimizing legal risks.
Understanding informal resolution through an example
Imagine a small business hires a contractor to renovate its office, but the work is delayed. Instead of immediately pursuing legal action, the business owner contacts the contractor, discusses the issue, and negotiates a new timeline. By resolving the problem informally, both parties avoid legal fees and maintain a positive working relationship.
In another case, an employee and their manager disagree over a performance review. Instead of escalating the issue to HR or a legal dispute, they have a meeting to discuss concerns and agree on a plan for improvement. This approach prevents unnecessary conflict and helps maintain a productive work environment.
An example of an informal resolution clause
Here’s how an informal resolution clause might appear in a contract:
“The Parties agree to make reasonable efforts to resolve any disputes arising under this Agreement through informal negotiation before pursuing formal legal action. If the dispute cannot be resolved informally, the Parties may proceed to mediation or arbitration as outlined in this Agreement.”
Conclusion
Informal resolution helps businesses handle disputes efficiently without resorting to costly legal action. For SMBs, addressing conflicts through open communication and negotiation can protect relationships, reduce expenses, and keep operations running smoothly. By including an informal resolution clause in contracts, businesses create a framework for resolving disagreements fairly and efficiently.
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.