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Why Do My Contracts Need an ADR Clause?

On Behalf of | Aug 21, 2017 | Business Law, Contract Law

Every business owner has signed an agreement at one point or another. In a perfect world, these agreements would always be executed as they’re agreed upon. However, everyone knows that contracts are breached and agreements aren’t honored all the time. These disputes and incongruities can lead to more trouble, headaches, and lawsuits more often than not. One thing is certain, when these issues arise, all parties are faced with potentially higher fees and costs than they initially anticipated. As a business owner, it’s imperative to find a way to mitigate the cost of these issues when they do arise. So, how is this done?

If you’ve never needed to implement an Alternative Dispute Resolution (ADR) clause, you should consider yourself lucky. If you have, then you understand the benefits of a properly written ADR clause, some of which we’ll be sharing in this blog entry. An ADR clause can help with many inconvenient post-agreement situations. That being said, if you’ve never heard of an ADR agreement, then you should consider the following.

An ADR clause is included in a contract or agreement and provides for a dispute resolution process that fall outside of the judicial process. There are many reasons to include an ADR clause. Some of the benefits include reduced costs (versus litigation), more efficient/expeditious, full compliance with due process, choice of arbitrator for arbitration, flexible scheduling, and confidentiality of proceeding to name a few. There are also different kinds of dispute resolution methods to consider when drafting your contract or agreement. Different industries are better suited for certain kinds of methods than others. The most common methods include arbitration and mediation. The more uncommon methods include structured negotiations, standing project neutral, standing dispute review board, and expert determination to name a few.

If you’ve ever had to implement an ADR clause then you may or may not have had issues when the situation presented itself. As great as an ADR clause is for both parties, it must be well written and specifically acknowledged by all parties on the agreement – on top of the agreement being properly executed. These elements are critical for the clause to take effect. Consult with a Nevada contract attorney before finalizing your agreements to make sure your ADR clause is enforceable.

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