Commercial Contracts: Why Dispute Resolution Clauses Matter
A dispute clause is often overlooked when parties are negotiating a successful transaction. When problems arise, however, that clause can determine how, where, and under what rules the dispute will be resolved.
Commercial agreements are usually negotiated when the parties expect their relationship to succeed. As a result, dispute-resolution provisions are sometimes treated as standard wording rather than a significant commercial decision.
A well-drafted dispute clause can determine whether a future disagreement proceeds through negotiation, mediation, arbitration or litigation. It can also establish the governing law, jurisdiction, location of proceedings, appointment of arbitrators, and procedural framework.
Unclear or contradictory provisions may create additional disputes before the substantive disagreement is even considered. Parties can find themselves spending time and resources arguing over jurisdiction or procedure rather than resolving the underlying commercial problem.
Cross-border transactions require particular care because the parties may operate in different jurisdictions and have different expectations regarding enforcement and dispute-resolution procedures.
The dispute clause should therefore be considered alongside the commercial risks of the transaction rather than being inserted automatically from a previous contract.
Acacia Attorneys advises businesses on commercial agreements, contract negotiation, dispute-resolution provisions, arbitration, mediation and commercial litigation.