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Can partnership agreements have dispute resolution clauses?

On Behalf of | Jun 23, 2021 | Business Litigation

If you want to launch a venture, you may have little choice but to find a business partner or two. After all, even if you have a brilliant idea, you may lack funding. You may also not have the skills or time to manage the enterprise’s day-to-day operations.

In business partnerships, disputes are usually unavoidable. Still, the most effective time to manage the disagreements you may have with your partners may be when you are setting up the partnership.

What goes into a dispute resolution clause?

The goal of most dispute resolution clauses is to resolve disputes without going to court. If your partnership agreement includes a mandatory dispute resolution procedure, you and your partners likely must follow it.

While your attorney may recommend specific language, most dispute resolution clauses have the following components:

  • An initial procedure for resolving disputes quickly
  • The procedures partners must follow to resolve disputes officially
  • A timeframe for raising issues and resolving disputes
  • A procedure for handling disputes partners cannot resolve
  • An allocation of dispute resolution expenses

What types of dispute resolution are common?

While the National Law Review recommends using arbitration to resolve partnership disputes, other types of dispute resolution are also common in partnership agreements. For example, your agreement may include a requirement for mediation, where you and your partners meet with a neutral third party to find common ground.

Even though Oregon courts have weighed in on the enforceability of specific dispute resolution clauses, they have also generally found these clauses to be legally valid. Ultimately, putting a meaningful dispute resolution clause in your partnership agreement may be critical for your venture’s future success.