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What should a dispute resolution clause include?

It is nearly impossible to entirely avoid disputes in the business world. However, there are ways that business owners can prevent disputes from developing into complex legal issues and proactively protect their business from expensive and risky litigation.

One of the most efficient strategies to manage disputes within the business is to craft a specific and unique dispute resolution clause in each contract.

An effective dispute resolution clause must be detailed

Merely including a dispute resolution clause will not help Oregon business owners navigate complex disputes. Each clause must be distinct to each contract. 

These clauses should also address specific factors, such as:

  • How parties should first address the dispute;
  • Which strategies are available to resolve the dispute, including mediation or arbitration;
  • The timeline available to bring and resolve the dispute; and
  • How the parties will cover the costs of resolving the dispute.

The clause provides a set of guidelines that each party can follow in the event of a dispute. However, most importantly, it also gives both parties an expectation of how they will resolve the issue. This allows both parties to determine precisely how they will approach a disagreement–hopefully without taking matters to court.

Remember: The language of the clause is important 

Each dispute resolution clause must cover the aspects listed above, and any additional elements that pertain to the specific situations. However, business owners can also make these clauses as specific as necessary. A contract can include several dispute resolution clauses that apply to many different disputes. For example, a construction company can have clauses that outline different strategies to handle different kinds of disputes.

It is often beneficial for business owners to speak with an experienced business lawyer when crafting these clauses because the language used in these clauses can make all the difference. The clause must be clear and the strategies realistic so that it can be truly effective in complex situations.

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