Can you require alternative dispute resolution in your contracts?

On Behalf of | Jun 5, 2022 | Business Law |

Business contracts generally outline what obligations each party has to the other. From establishing a timeline and the payment schedule to restricting future economic activities, there are many inclusions for contracts that can help protect those signing the documents.

Sometimes, despite the best intentions of everyone involved, there will be a major dispute about a contract. Should you consider including mandatory, binding arbitration clauses in your contracts to avoid litigated disagreement?

The right terms can make or break a contract

While including contractual provisions that require alternative dispute resolution may be beneficial, dictating that binding arbitration is necessary may not be as helpful as you think.

The frequent inclusion of mandatory, binding arbitration clauses in the contracts offered by big businesses is a practice that has come under scrutiny in recent years. Most prospective employees and business partners already know that such agreements tend to benefit the company requiring the arbitration.

A better solution may be to require some form of collaborative negotiations before either of you takes a matter to court. Agreeing to have a sit-down meeting, a mediation session or even non-binding arbitration can be a way to keep your conflicts out of court without making people feel uncomfortable about signing your contracts.

Alternative solutions to disagreements can reduce how much it costs the parties to resolve their them. It can also preserve your reputation, as the disputes are less likely to become public knowledge if you stay out of court.  Integrating the right terms into your business contracts will help reduce conflicts and make them easier to resolve when they do arise.