Few know whether or not they should have an Alternative Dispute Resolution (ADR) clause, and most are not always confident with details in the contracts in general. In addition to the difference between ADR and litigation, we at Kajioka & Associates Attorneys at Law, would like to discuss why you may want to include such a clause in your contract. Something that every business owner has to learn is the art of negotiating contracts and agreements. Though when these issues arise it can be costly for all parties involved, there is always a risk of disagreements, breaches in contract or agreement terms, and lawsuits on the horizon.
What is an ADR Clause & How Does it Work?
It is important to include a clause that addresses how disputes between you and your partner will be handled, if you are in the process of creating an agreement. Then the default law for where you live will apply if in the event this is not included in your contract. It is highly recommends getting a business lawyer to assist you when drafting any type of business agreement by the experts of Kajioka & Associates, Attorneys at Law. This standard clause will be perfect for that if in the event you are looking to resolve your disputes in a more amicable way. Before submitting the dispute to litigation or arbitration, it includes an alternative dispute resolution (ADR) period of negotiation and then mediation. Due to its requirement that all parties agree on ADR methods prior to initiating any formal legal system proceedings, this type of clause is sometimes referred to as an escalation clause.
Is Litigation Better than ADR?
Often paired in law school are litigation and ADR. The process of preparing a case for court is referred to as litigation. The processes which can take place either independently or during the course of litigation within courts include alternative dispute resolution (ADR) includes mediation and arbitration. While mediation is a relatively recent invention, litigation has been the traditional method of resolving conflicts for centuries. If in the event they remain dissatisfied with their agreement, mediation differs from litigation in that parties are free to pursue other avenues. Decisions made during trial can be binding and difficult or impossible to overturn later on down the line in contrast.
Should Businesses Include ADR Clauses in All Contracts?
In the event of any future dispute, when deciding whether or not to include a contractual provision mandating ADR, careful consideration and exploration is necessary. Including mediation as an option would make sense with some reasonable time parameters specified if you want disputes resolved before resorting to litigation on one hand. When the situation presented itself, if you’ve ever had to implement an ADR clause then you may or may not have had issues, it is important that all parties are aware and acknowledge this part of your agreement. In order for a court to enforce any settlement made under such terms, this element must be clearly stated.