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Multi-Tiered Dispute Resolution Clauses Enforceable If 4 Criteria Are Met

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Multi-tiered dispute resolution clauses may be enforceable if the procedure is certain (eg. specific mediator or center is specified); mandatory language is used (‘shall’ instead of ‘may’); a clear time limit is provided before arbitration is available; duties to act ‘in good faith’ to resolve the dispute are in the context of a clause which is certain in all other aspects noted above.

A 2014 English Commercial Court case upheld ‘friendly discussion’ obligation clauses in a contract because it had the certainty required for an enforceable contract clause. The clause was a ‘multi-tier’ or escalation clause, which provided for different ways of dispute resolution as disputes escalated. The case marked a departure from previous English decisions, but is consistent with other jurisdictions, including Australia.

Read the article here.

Take away:

  • To be enforceable, the four elements of a multi-tiered dispute resolution mechanism must be drafted in mandatory language (‘shall’, ‘must’).

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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‘Informal Negotiation’ Or ‘Friendly Discussion’ Clause May Constitute Condition Precedent to Arbitration

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If the requirement to attempt to resolve a dispute through ‘friendly discussion’ or informal negotiations is mandatory, time limited, contained in the dispute resolution clause, and arbitration is to follow this, some courts may enforce the requirement as a condition precedent to arbitration. The procedure must be certain and clear before it can be a condition precedent to arbitration.

This article discusses an English Commercial Court decision where the court ruled that an agreement to first seek to resolve a dispute by “friendly discussion” constituted an enforceable condition precedent to arbitration. Parties should be aware that the English courts may now enforce a time-limited requirement to seek to resolve a dispute by good faith negotiations, as a condition precedent to arbitration.

The court made it clear that the mandatory nature of the requirement to engage in friendly discussions results from the language of the agreement itself, and not from general policy considerations.

Read the article here.

Take away:

  • If the language of the arbitration clause states that friendly discussions “shall” or “must” take place within a defined time period before a party may give notice of intention to arbitrate, the friendly discussion clause may be enforced as a condition precedent to arbitration.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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County Commissioners Reconsider ‘Controversial’ 3 Step Dispute Resolution Mechanism in Proposed Contract

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A three step dispute resolution mechanism which moved from informal negotiation to mediation to binding arbitration, was questioned as being prohibitively expensive for a county when compared to the resources of the counterparty corporation.

The article considers the Lake DeSmet operating agreement between Johnson County and Sasol Synfuels International, Inc., co-owners of the lake’s water storage rights. According to the operation and maintenance contract proposed by Sasol, any breach between the commissioners and Sasol takes three steps to resolve. The first step is an informal negotiation between the lawyers. If that doesn’t work, the dispute moves into a non-binding mediation where the two parties appoint an agreed-upon mediator to resolve the dispute. If that fails, the parties must submit to binding arbitration. The county commissioners expressed concern at the cost of the arbitrators, and the length of time required to resolve disputes under the proposed mechanism. A decision was made to renegotiate the terms of the dispute resolution mechanism.

Read the article here.

Take away:

  • When designing dispute resolution mechanisms, parties should consider the likely cost of implementing these mechanisms.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Can Consumers Be Forced into an Arbitration Agreement by ‘Liking’ a Brand on Facebook and Receiving a Coupon?

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When will a website user be bound by an arbitration clause that is buried in the Terms of Use Agreement? When addressing such questions, courts look to the basic principles of contract formation – the meeting of the minds – to determine whether consent was given to the formation of a contract. In general, the courts have favoured ‘click wrap’ agreements, where the consumer is required to click “I agree” to indicate intention to be bound by the terms and conditions. The closer the link to the terms and conditions is to the “I agree” button, the more likely it is that the court will find consent has been given.

But what if the terms and conditions impose an arbitration clause on a user who clicks “Like” on a Facebook page in exchange for receiving a coupon to a brand name product? Recently, General Mills received a great deal of blowback for what appeared to be an attempt to force an arbitration clause on anyone who visited its site. As a result of the unwanted media attention, General Mills retracted its position, and clarified that the clause only applied to users who “subscribed to our publication or downloaded a coupon”. Most consumers would be surprised to learn that purchasing a product with the use of a coupon would result in a waiver of their rights to sue General Mills for harm suffered as a result of using the product.

While legal commentators are split on the enforceability of General Mill’s arbitration clause, it remains important to ensure that site users are actually made aware of any arbitration clause in the terms of use before they can click “Like” or “I agree”.

Read the article here.

Take away:

  • The enforceability of an arbitration clause in a website terms of use agreement will depend on the physical design of the webpage and the likelihood that the user had access to the terms and conditions before “clicking”.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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