From John DeGroote’s Settlement Perspectives
Last week we defined multi-step dispute resolution clauses and explored why a dispute resolution framework, negotiated before the contract is signed, can help businesses avoid litigation in many cases. This post will give you a few more reasons why your client might want a multi-step dispute resolution clause next time — even if a dispute seems unlikely.
To better understand why I spoke with my longtime transaction counsel Colleen Vossler last week, and she made her clients’ case clearly:
In my experience many clients with long-term contracts understand the intrinsic value of creating, at the outset of the relationship, a roadmap to follow when disputes arise. Importantly, the client shares the same roadmap with the other party – rather than creating separate roadmaps when the dispute is upon them. Clients who have experienced conflicts in long-term contracts, where the preservation of the relationship may have more value than in a short-term contract, often view these clauses as an insurance policy for when a dispute arises.
The “roadmap” provided by a multi-step dispute resolution clause (also called a “multi-tiered dispute resolution clause” or an “executive escalation clause” or an “escalating levels of management clause”) can give clients comfort. In response to my last post on these clauses, a nonlawyer business executive reached out to remind me how valuable it can be to have a pre-negotiated way to stop “the letter writing and ask for a visit with all key parties involved.” When clients speak, it pays to listen.
Here are a few reasons, in no particular order, why your client may want an executive escalation clause next time:
With these perspectives on why clients like them and last week’s 7 reasons they work, you have plenty of incentive to give a multi-step dispute resolution clause a try in your next commercial contract. You’ll be glad you did.
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