Contractual dispute resolutions – part 1

| NL Law

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Contractual dispute resolutions: effective conflict management

Disputes and conflicts are inevitable, even in business, the inclusion of a contractual dispute resolution can prevent escalation and restore balance within the company. In this inaugural blog of the series on contractual dispute resolution, we delve into the topic at hand.

What is a contractual dispute resolution scheme?

A contractual dispute resolution scheme is a pre-established procedure used to resolve disputes between parties out of court. Such an arrangement can be included in, for example, the shareholders’ agreement, in the articles of association or other business documents. An external expert is usually appointed who will tie the knot in the event of a dispute.

Why is important?

A well-developed contractual dispute resolution scheme can be a valuable tool for companies and organisations to resolve disputes in a constructive and efficient manner. However, care must be taken to ensure that the contractual dispute resolution scheme does not make the transfer of shares extremely objectionable or impossible. In that case, statutory dispute resolution will apply.

What are the advantages?

A contractual dispute resolution has some advantages over court proceedings such as:

  • efficiency and cost savings: the process is often faster and more cost-effective than lengthy court proceedings;
  • preservation of relationships: the business relationship can be preserved by resolving the dispute in a more constructive way;
  • confidentiality: in some cases, a contractual dispute resolution can safeguard the confidentiality of the dispute, unlike public court proceedings.

What is the procedure like?

The steps below gives you an overview of how a contractual dispute resolution procedure could potentially work. Obviously, the course of the proceedings depends on what has been contractually assumed and how the parties behave towards each other. If the parties are miles apart, informal negotiations will be skipped, for instance.

  1. Negotiations: Typically, informal negotiations are attempted first. These may occur with or without the assistance of legal advisors.
  2. Mediation or Arbitration: If negotiations fail to yield a resolution, mediation or arbitration may ensue. It will be contractually specified which option should be pursued.
  3. Judicial Procedure: If all previous attempts fail, the dispute may be brought before the court. It may also be stipulated that parties are required to engage in further negotiations, mediation, or arbitration before resorting to litigation.

Embedding a contractual dispute resolution procedure in your company?

LexQuire’s professionals can advise you on – and if necessary draft – a contractual dispute resolution scheme for you. When drafting and implementing a contractual dispute resolution scheme, the specific needs and nature of your business are always paramount. LexQuire offers you expertise in drafting watertight clauses and can also help guide you through the process of a contractual dispute resolution.

In short, a well-drafted dispute resolution agreement is a valuable tool for companies to resolve disputes efficiently and effectively. It can provide a solid basis for maintaining business relationships and ensure the continuity of your business.

Do you want to know more?

Should you have any questions regarding a contractual dispute resolution scheme or are you planning to incorporate such a scheme in your business? If so, please contact one of LexQuire’s specialists. They will be happy to advise you on your options.

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