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Should your business contracts include an ADR clause?

On Behalf of | Sep 29, 2022 | Business Law, Business Litigation, Firm News

Alternative Dispute Resolution, or ADR, is a way of resolving conflicts outside litigation. An ADR clause requires parties to use collaborative methods, including negotiation or mediation, before litigating a dispute, whether you have contracts with partners, vendors or customers.

Here are four reasons for including an ADR clause in your business contracts:

  1. Disagreements between you and other parties are inevitable and can happen when you least expect them. Thus, including an ADR clause in your contract can help control the costs you will incur in the event of a disagreement or breach of contract.
  2. An ADR clause in your contract can maintain or salvage relationships between you and the parties you have entered into an agreement with, which is vital if you continue to work together.
  3. Including an ADR clause in your contracts encourages everyone to collaborate while retaining the right to seek reparations via litigation and the courts if that does not work. It provides an opportunity to attempt to work through conflicts together first.
  4. You can still have your attorneys conduct the negotiations or mediation on your behalf. Most litigation attorneys have ADR experience or can bring in an expert in ADR to assist in the discussions.

While most business owners associate breaches of contracts with litigation, there are other ways to resolve conflict outside the courtroom and before things get out of hand.

Alternative Dispute Resolution can be a highly effective approach to solving problems between parties. Having an ADR clause in your contracts would allow you to have this option while leaving room for litigation if collaborative methods do not solve the matter.

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