#RVABizLaw Tip of the Day: Dispute Resolution Clauses Can Save Money and Preserve Business Relationships

Even with the comfort that an important business transaction or relationship has been carefully memorialized through a written agreement, contract disputes can arise for a variety of reasons.  When they do, the parties need to quickly make some important decisions.  In the small business world, litigation is often a regrettable choice as a dispute resolution strategy.  Litigation can be prohibitively expensive, time consuming, and distracting to a small business owner and, by the way, most lawsuits end up being settled out of court anyway.  Adding a dispute resolution clause to your business agreements can provide a more efficient path to resolving contract disputes.  Two common alternative dispute resolution procedures are mediation and arbitration. Mediation is an informal process in which a third party facilitates a discussion between the disputing parties that will hopefully culminate with a mutually agreeable resolution to the dispute.  Relatively speaking, such a negotiated resolution will be much cheaper and quicker than litigation. Arbitration, on the other hand, more closely resembles a judicial proceeding.  One or more third parties are chosen to serve as arbitrators and oversee a quasi-judicial hearing during which each party presents his or her case, presents, evidence, calls witnesses, etc.  The parties typically will agree in advance on the specific structure of the arbitration process and be represented by legal counsel, but not always.  The arbitrator renders a decision and, in many cases, that decision is considered final and binding on the parties.  Reasonable people can disagree on whether arbitration ultimately saves much time and money as compared to litigation, but clearly the less time a small business owner has to spend in a court of law, the better.  Alternative dispute resolution clauses come in many different shapes and sizes, so be sure to discuss with your legal counsel and reach out anytime if we can be of assistance in drafting or reviewing your business contracts.


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