For those of our readers who are not familiar with alternative dispute resolution processes—mediation or arbitration, they are simply tools to settle conflicts. They are alternatives to litigation, which the parties to a business contract may agree to use in hopes of avoiding potentially time-consuming and expensive lawsuits.
From a small business perspective, it is generally advantageous to include a mediation or arbitration clause in business contracts. They aid in minimizing the likelihood that your small business will be sued and you will wind up before a judge and jury.
Some considerations when discussing the possibility of adding a mediation or arbitration provision to your contracts with your small business attorney are discussed here.
What Will Work Best for your Company? Requiring the use of arbitration or mediation can be beneficial in that these legal tools can prevent lawsuits from reaching a courtroom in many instances. However, it is important to consider the scope of such provisions by asking yourself questions such as: Will mediation be mandatory in all instances? Will arbitration be binding or appealable? What if one of the parties needs equitable relief afforded by the courts, such as an injunction to prevent immediate, irreparable harm? Is alternative dispute resolution provisions generally enforceable for the type of business contract you are contemplating?
The Need for Clear Cut and Concise Wording There should not be any question as to how the arbitration or mediation process will be handled should it be needed. Among the questions about the process which may be included in the contract are:
Who will choose the arbitrator or mediator?
How will the costs be covered?
Will an arbitrator be bound to legal precedent when making a decision?
Are there special skills that the arbitrator or mediator must have to be qualified?
Will attorneys be permitted during the mediation or arbitration process?
What amount and form of discovery will be permitted?
These and other questions should be considered in determining whether an alternative dispute clause is right for your situation. In drafting your business contracts, make sure your mediation or arbitration agreement is well written and serves the best interests of your small business. Contact our experienced business attorneys for your free evaluation.