The dispute resolution clause stipulates the approach that will be used if a disagreement occurs between two contracting parties. This may involve litigation, arbitration, mediation, negotiation, or using third parties to find a common ground for both sides. This clause basically outlines the procedures that will be enacted if a conflict arises. It is imperative to note that the scope of the agreement being made depends on the scope of the contract. Each side is given an opportunity to identify the best dispute resolution procedure so that once a disagreement occurs, the strategy can be applied. In most cases, companies often provide mechanisms as opposed to litigation procedures because the latter is expensive, too public and may damage the long-term relationship of the contracting parties.
The institution of this clause comes with a number of advantages and disadvantages. In some cases, individuals or corporation may decide to choose procedures that may be less time consuming and less costly. Under this provision, cost-effectiveness and time-saving attributes are considered as the main merits. In this case, the clause may indicate that a neutral party will resolve any dispute that will arise if it occurs. The demerit of the dispute resolution clause comes from the fact that it may propose the use of a quicker and less formal procedure that may not serve the best interests of each party. This means that at some point, one side of the contract may not be satisfied with the decision that is reached because the technique that was used was unprincipled. For such cases, court rules, evidential procedures, and other formalities are not applicable and as such, the solution may be provided in an unprofessional manner without considering the interests of both sides. Conflicts are inevitable in any setting and as such, this clause will be very important for contracting parties because it outlines the procedures that will be used to solve any dispute that arises.
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References
“Common Contract Clauses.” YouTube, uploaded by HBAberks , 19 July 2012, https://www.youtube.com/watch?v=7ZkSI_8ju4o
