ADR Agreements

In general, parties who enter into a contractual agreement must, from the outset, consider how the arrangement will work out in the face of conflict. Parties can prevent complicated and costly litigation by forming the terms of a dispute resolution plan when they decide on the terms of the contract. Towards that goal, parties can gain perspective of their options by consulting with an experienced attorney who understands both litigation and Alternative Dispute Resolution (“ADR”) procedures.

Although, there is no required form or language that the parties need to use, however they must describe their dispute resolution plan. The agreement must contain guidelines regarding the nature of potential disputes that will fall under the agreement, the parties to the dispute, and the applicable alternative dispute resolution procedure. For instance, parties can agree between negotiation, mediation, and arbitration. The parties may also agree to resolve disputes through private judging, or using a combination of any of these techniques.

The parties should aim to select procedures and define specifics that will be most beneficial to the terms of their unique agreement. The ability to define a dispute resolution plan that fits the agreement will work towards ensuring that the parties resolve disputes efficiently and with mutually beneficial results. To this end, parties should consider the types of potential disputes that may arise, their respective objectives, and any ongoing relationships between the parties. For instance, if the parties engage in continuous business and are involved in multiple contracts, it becomes substantially more important to initiate a dispute resolution tactic that will preserve their business relations.

Additionally, the interested parties must indicate whether the ADR procedures in their dispute resolution plan will be binding. For instance, they may agree to participate in negotiations, mediation, and arbitration, while stipulating that neither will be binding. This form of a clause will leave the option open to pursue traditional litigation, when and if, none of the alternative dispute resolution methods lead to a final result.

In sum, specific details are important in agreements that call for ADR techniques other than arbitration. In agreements that call for arbitration as a means of resolving disputes, applicable regulations will determine the specifics of the agreement, such as selection of an arbitrator. However, in the case of other ADR procedures, there are no regulations to fill in the gaps in the agreement. As such, the terms of the ADR agreement will rely entirely on the terms the parties agree upon. Therefore, it is essential that the parties invest the time to draft the agreement carefully.

Furthermore, the interested parties have room to define what these alternative procedures will entail. Since mediation and negotiation are relatively broad concepts, they can agree to the parameters of these procedures. This freedom allows the parties great discretion to customize a dispute resolution plan that best fits the circumstances of their agreement.