To resolve contract disputes, businesses and individuals have different options at their disposal. The primary approaches are: “negotiation”, “meditation”, “arbitration” and “litigation”, and each one offers advantages and challenges:
- Negotiation: This is the most informal and cost effective method, the parties can discuss independently and directly between themselves or with a legal representative to reach mutually to an acceptable accord. With legal representation it is most prudent to avoid unnecessary disclosures and improper accusations.
- Meditation: The mediator is a third party, often a former judge or experienced lawyer, and they must be neutral in finding compromises while assisting the parties for preserving professional relationships. Both parties need to agree to a middle ground without being forced. The meditation may fail if one of them refuses to compromise.
- Arbitration: This is a more formal option, it’s an alternative to court proceedings, when an arbitrator hears both sides and tries to bind a decision. It’s used in international contracts widely due to its efficiency and enforceability under treaties like “Convention of New York 1958”.
- Litigation: This is a last resort, and often has the highest risk as well as upside. Litigation can get costly very quickly, so make sure you have all of the right evidence ready to assert your claims or defenses from the outset, so your lawyer does not waste time later on trying to collect it from you.
Generally, it is always important to make sure that the contracts are understable, clear and detailed. Clarity in the language of a contract can be achieved using clear wording and avoiding ambiguities, and defining parties obligations and responsibilities.
Other steps to follow for preventing lawsuits include establishing conditional clauses, include penalties for any violation of contract terms, and arbitration clauses designating who will arbitrate any disputes to minimize the cost of resolving disagreements.
