5 Contract Clauses to Help You More Quickly Resolve Contract Disputes
The purpose of executing written business contracts instead of relying on oral agreements is to manage risks and expectations. When I draft contracts, my job is to state clearly the parties’ responsibilities under an agreement. My job is also to prepare my clients for the possibility that things take a turn for the worse and the other party fails to fulfill their promises. A major benefit of having a contract is to help you more quickly and easily resolve a dispute if it arises. Quickly and easily resolving disputes means your business will spend substantially less money dealing with dispute resolution, so it is important for your bottom line that you ensure your contracts are well drafted to prepare you for the dispute resolution process.
When I’ve reviewed other contracts I found five common clauses that, if included or improved, could have saved my clients a lot of money when it came to resolving their dispute:
Often when I’ve seen parties draft their own contracts, the contracts are missing essential terms, such as certain dates and terms of payment. And if the parties have relied on oral agreements, it is difficult to understand from the other recorded communications exactly what the parties actually agreed to. If a dispute arises over a contract that isn’t in writing or is missing several key terms, it is challenging to determine the strength of a party’s case, which makes pursuing the claims more difficult and risky.
An integration clause states that the written agreement is intended to be the full and complete contract between the parties. An integration clause in a contract, signed by both parties, will be strong evidence that the agreement was meant to be the full agreement. If the court determines that the contract was intended to be the final agreement, it will bar other evidence of prior interactions to affect the interpretation of the contract at trial. This can help prevent a dispute over a contract from unravelling into a dispute over the entire business relationship, and it helps prevent the other party from using your contract negotiations against you.
Alternative Dispute Resolution
In most of our contracts, we include a clause for binding arbitration. Why? There are many alternative dispute resolution methods, but arbitration is generally a fast and cheap way to resolve a dispute. Our arbitration clause generally uses the “baseball method” of arbitration. We use this method of arbitration because this type is meant to heavily incentivize the parties to come to a mutual agreement. Both parties submit their last and best offer to the arbitrator, who can only pick one offer or the other. Neither party wants to have the other party get everything he or she wants, so they tend to meet in the middle.
Choice of Law and Venue
If it doesn’t make sense to have comprehensive alternative dispute resolution clause, contracts should at least include a choice of law and venue clause. The choice of law language provides which state law will apply to the breach of contract claim. The choice of venue language provides the location of where a party must bring suit. It is beneficial for a party to choose their local law and venue, because your witnesses, evidence, and lawyers will likely be from the area. For a more in depth discussion on choice of law and venue, check out our post here.
In litigation, attorney’s fees are only granted if it is in the contact or if a state statute provides for attorney’s fee. For example, Washington state law provides for attorney’s fees if the party succeeds in a claim against an employer for withholding wages or salary. There are very few claims where the law grants attorney’s fees, therefore, it is very valuable to include a clause that grants attorney’s fees to the prevailing party in a suit. This will disincentive the breaching party from dragging the suit through further litigation if the party knows they’ll be responsible for the other party’s attorney’s fees. By including it in your contract, you prevent other parties from thinking twice about bringing a frivolous suit, but you also allow yourself to have the other party pay for your attorney fees if you have to bring a suit to enforce the contract.
Now is a good time to check your business contracts for these important clauses and that you understand key contract terms. If you have any questions about your contracts or would like to schedule a free consultation, contact us today.