Why Contracts Need a Dispute Resolution Clause Part 2
In Part 1 of this two-part series, we explained the importance of having a dispute resolution clause drafted into your contract. In this article, we go over the different types of dispute resolution methods used in contracts. Disputes can be handled via negotiation, mediation, arbitration, or litigation.
Types of Dispute Resolutions
The best time to determine the handling of disputes is while your contract is being drafted. This is where the expertise of a Jacksonville construction lawyer is critical. Parties will come together to agree on the form of dispute that’s best. There will be an opportunity to negotiate and revise which will involve weighing the advantages and disadvantages of the method chosen before finalizing it and signing it.
Litigation is a traditional method of dispute resolution which involves filing a lawsuit, hiring an attorney, and handling the dispute in a courtroom. The parties involved are at the mercy of the court and it can get expensive; however, it should be used as a last resort. The following are Alternative Dispute Resolution methods:
- A Negotiation is the least costly and formal method. This method is voluntary, doesn’t require an attorney, and parties have the final say over the outcome.
- A Mediation is a non-binding method where a mediator, such as an attorney, is selected to help parties reach an agreeable resolution, but parties still have control over the final outcome. It is less costly and less formal than a litigation.
- An Arbitration is more structured than a negotiation and mediation. The parties will select an arbitrator who will decide the outcome after a hearing. An attorney is recommended as arbitration can become hostile. Although arbitration can be less costly than litigation, it can also be just as expensive and time-consuming as a litigation.
What to Consider Before Choosing
Before choosing a dispute resolution method it’s best to think about whether parties want a formal environment, whether parties want to keep the business relationship intact after the dispute, and whether parties want control over the outcome or if they’d rather a third-party make the decision. It is also advised to think about the limitations, advantages, time commitment, and the cost of each method.
As expert litigation and arbitration attorneys, we recommend parties reconcile disputes starting with the least costly, the least time-consuming, and the least adversarial methods first. Ideally, construction professionals should aim to preserve relationships if possible.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.