(Five Minute Read)

As we have said in our earlier posts, a contract is simply an agreement backed with consideration. A breach of such agreement may lead to the other part seeking for damages in court. ADR(Alternative Dispute Resolution) clause is a mechanism for resolving dispute between parties without going to court. It's a popular saying that you don't come back from court as friends. ADR attempts to settle whatever dispute might have risen without you going to court.

Startups, Business and Individuals should understand the secret weapon in using an ADR clause, in their contracts. It can save you a lot of headaches, although not totally foolproof.

Make no mistake, ADR does not bar either parties from going to court; the ADR clause only ensure that before you explore the option of Going to court you must have exhausted the ADR solutions.
You probably use a lot of contracts in your business, and an ADR clause might be useful in all of them. For instance, You can use an ADR Clause in your contract of employment; to ensure that where a dispute arises between the employee and the company, or vice versa; such party must first have recourse to ADR before suing in court.
Contract conflict happens every time, no matter how well drafted a contract is, by even the most qualified professionals, it does not stop a contract conflict.
An ADR clause has many advantages, to your business and even reputation. It can save you from a lot of unnecessary bad publicity. There are some cases, where even if you win them, they are useless in the long run, because of the time, money and other resources it has gulped. It is good practce for an arbitration clause between parties to be in writting and part of the contract signed.

Where there is no ADR clause in a contract, the parties can still decide to go through alternative dispute resolution, to resolve whatever dispute might have arise in their contract.
The regular element of contract are nessary in making the clause binding.

Reasons to have an Arbitration Clause

1. Time
When parties go through the process of ADR, it relatively reduces amount of time, unlike court litigation, spent in the process of resolving the contractual issues. Court litigation sometimes go from trial court all the way to the supreme court, this drags and make court judgment almost irrelevant in the long run.

2. Court Technicalities and Procedures
Court Litigation process are generally bugged down with numerous technicalities and procedures, many times justice is sacrificed on the alter of technicalities and procedures ADR on the other part is not bugged down with technicalities and procedures as found in court litigation.

3. Saves Money
Court litigation process is a costly process compared to ADR, a lot of money go down the drain in lawyers fee and research work. With ADR, these expenses are reduced.

4. Foster Relationships
A Successful ADR saves business relationship between parties, it doesn't necessarily drive a wedge as much as litigation does. It

5. Confidentiality
The process of ADR is more confidential than the normal everyday court litigation process. In ADR, it is basically both parties that will be in attendance. While, court litigation needs to be held in public except by special order of the judge. Litigation process allows the dirty underlines of the party to be publicly washed and it officially becomes a public record. ADR allows more confidentiality than court litigation.

Next time you sign a contract, it's good practice to ensure that an ADR clause is inserted and agreed to by the parties.




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