Imagine your most important business agreement has been breached by the other side. What would you do?
For many companies, the answer is a costly lawsuit that often sucks up more time and money than the amount of damages caused by the breach in the first place.
Is there an alternative to a breach of contract lawsuit?
Have your agreements drafted an experienced business lawyer so that they favor resolving disputes quickly and at minimal cost.
Here are three key issues to cover in your business contracts that should fix most problems:
(1) Include a comprehensive alternative dispute resolution process;
(2) Make the law that governs the agreement favorable to you; and
(3) Have disputes settled in a location that minimizes your costs.
Related Article: 5 Things You Should Review With Your Business Lawyer Annually
1. Alternative Dispute Resolution Clauses
Your agreements should provide for a multi-step process for solving problems without going to court.
Common stages of dispute resolution include informal discussions between the parties, mediation, and arbitration (binding or non-binding). Many business attorneys who are not trial lawyers prefer binding arbitration for their clients because it typically saves time and is cost-effective.
2. Applicable Law
Make sure that the law governing your agreement generally favors you. This is particularly important when the other party is located in another country whose laws on contract enforcement are lax or nonexistent.
Even if you’re not heading to court, you’ll want the location of your dispute resolution process to be in a location that’s convenient for you. Ideally, that will mean having the contract provide that mediation and arbitration occur in the same geographic area (e.g. city or county) as your company’s headquarters. In the alternative, if the other party insists, agree in the contract to resolve disputes at a neutral location that’s mutually convenient.
What contract disputes should your business lawyer encourage be resolved by a court instead?
Unfortunately, sometimes it’s necessary to sue to protect your company’s legal rights. Because of this, your corporate legal counsel will want to carve out exceptions to mandatory alternative dispute resolution to cover issues like intellectual property infringement, violation of a non-competition clause, and related matters where equitable relief from a court may be needed.