Including in a contract a clause requiring the parties to attempt to settle any dispute arising out of the contract using ADR is usually much easier during the negotiation phase of a contract, when parties are cooperative and they consider the chance that a dispute will arise a remote possibility. This will increase the likelihood of settling a dispute before the parties resort to court proceedings or arbitration.
An ADR clause ensures prompt and efficient dispute resolution, which is particularly important for business people, who often complain about the inefficiencies related to going to court. In this way, parties manage the cost and risk associated with the resolution of the dispute, as they do with any other cost or risk related to a business activity.
Even if the parties cannot resolve the dispute through negotiation, inclusion in a contract of an ADR Center, multi-phase ADR clause that includes a mediation stage effectively increases the possibility of settling a dispute before resort to court proceedings or arbitration.
Advantages of inserting an ADR clause include:
• Parties will use an efficient procedure that, unlike negotiation, would not otherwise be considered in the event a dispute arises
• Prompt resolution of the dispute
• Confidentiality cloaking the procedure and the outcome
• A risk-free procedure controlled by the parties
• Parties choose the third party neutral
Model clauses (download doc. word)
Why consider inserting a Mediation clause before resort to arbitration or court proceedings? (download pdf)
Why use ADR Center clauses? (download pdf)
How to draft an ADR clause
Sample Arbitration / Mediation (ADR) Clauses
American Arbitration Association Suggested Clauses:
Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance...