An dispute resolution clause is a section of a contract that deals with the parties’ rights and options in the event of a legal dispute over the contract. Specifically, a dispute resolution clause specifies the means through which parties can resolve disputes that arise as a result of an agreement.
One of the most popular dispute resolution clauses in commercial contracts is the arbitration clause. There, the parties agree not to sue each other, and instead resolve their disputes through arbitration. Arbitration is a process that allows a third-party arbitrator(s) to listen to the parties’ cases and reach a decision as to the rights and obligations of each party.
After a decision is reached by the Arbitrator or the Arbitral Panel, it is now registered and enforced as a judgment of the Court.
Parties may also opt, in their agreement, for mediation, conciliation or other forms of dispute resolution, including litigation (in which case the parties may agree to be bound by a special law or procedure).
In each of these clauses, the parties can also decide the rules/laws under which disagreements arising from the transaction will be guided and the location where the dispute resolution will take place as well as the kind of person to preside over the dispute resolution.
BENEFITS OF DISPUTE RESOLUTION CLAUSES
Some of the benefits of a dispute resolution clause are that:
- It allows parties to decide how they want their disputes resolved.
- it aims to resolve contractual disputes early, quickly, and cheaply;
- it keeps disputes out of the public eye;
- it helps maintain business relationships when contractual disputes arise; and
- if used properly, small businesses can use them to defend against large businesses with more legal resources.
