Are You Looking for Model Dispute Prevention and Early
Resolution Contract Clauses to Use in Your Contract?Are You Looking for Model Dispute Prevention and Early
Resolution Contract Clauses to Use in Your Contract?This model contract language has been reprinted (with permission) by dozens of professional organizations throughout California and used by numerous companies and business professionals. It's a sample from the collection "Ron Kelly's Best Selected Training and Practice Handouts".
Following also is an excerpt from the accompanying guide to using of these handouts most effectively.
Model Dispute Prevention and Early Settlement Contract Clauses
Guide to Using "Model Dispute Prevention and Early Settlement Contract Clauses "
Links to Other Useful Information:
To contact Ron, please call 510-843-6074 or Fax: 510-843-4439 or Email: ronkelly@igc.org
l. PREVENTION OF CLAIMS. We agree that we have a common interest in preventing any misunderstandings or differences that may arise between us from becoming claims against one another. With the intent of avoiding this, we agree that we shall make good faith efforts to identify in advance and discuss the potential causes of disputes in projects like ours. We agree that we shall make good faith efforts to jointly review the progress of the work on a [daily, weekly, etc.] basis. We agree to promptly bring up and resolve any miscommunications or dissatisfactions which we become aware of, and to each initial entries in a jointly-maintained journal documenting our discussions and resolutions. Upon agreement that the work to date appears satisfactory, and upon written approval by inspectors, engineers, etc. where required, we agree that we shall initial a journal entry to this effect, that a check shall be issued in accordance with the payment schedule, [that a partial or full Release of Lien shall be issued if applicable], and that work and payments shall continue through to substantial completion.
2. VOLUNTARY SETTLEMENTS - DIRECT AND MEDIATED NEGOTIATIONS. We agree that, should any difference of interpretation, or any other controversy or claim arise out of, or related to our contracts dated , or the breach thereof, we shall immediately make good faith efforts to negotiate our own written voluntary resolution of the matter directly between ourselves. We agree that, if the matter still remains unsettled for [thirty, forty-five, etc.] days after certified mail notification that a dispute exists, we shall immediately jointly retain Ron Kelly, or another mutually-agreed neutral mediator with at least ten years experience in dispute resolution in this field, and conduct and participate in confidential mediation, to continue attempting to work out our own written voluntary settlement. We agree that if any of us files any arbitration claims, or administrative or legal actions, for disputes to which this clause applies, without first having attempted to resolve the dispute ourselves through neutral mediation, then that filing party shall not be entitled to collect attorneys fees or procedural costs, even if they would otherwise be entitled to them (subject to the discretion of the arbitrator or court involved).
3. ARBITRATION OF DISPUTES. We agree that if, and only if, the dispute still remains unsettled for an additional [thirty, forty-five, etc.] days, then we shall submit the dispute to binding neutral arbitration. In this event, we agree that any controversy or claim arising out of, or relating to our contracts dated , or the breach thereof, shall be settled by binding arbitration in accordance with the applicable rules of the American Arbitration Association then in effect as modified below. We agree that Ron Kelly, or another mutually-agreed arbitrator with at least ten years experience in dispute resolution in this field, shall serve as our neutral arbitrator. We stipulate and agree not to seek to introduce in evidence, and not to compel the production of, documents prepared for, or statements made in the course of, our settlement discussions including the confidential mediation process, in any subsequent arbitration, litigation, or administrative proceeding, except that fully-initialed journal entries as described above, and any written change orders and dispute settlement agreements which have been fully signed by all necessary parties, may be introduced in evidence.
We stipulate and agree that no mediator shall submit, and no arbitrator, court, or other adjudicative body shall consider, any mediator evaluations, recommendations, declarations, or findings, unless all mediation participants specifically later agree in writing. We agree that judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. We agree that in any action, or arbitration claim, brought to interpret or enforce the terms of our contract dated , and any written settlement agreements as described above, [we shall each bear the costs of presenting our own cases.[OR] the prevailing party shall be entitled to reasonable attorneys fees and procedural costs.]
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE [or in residential construction contracts substitute: "BUSINESS AND PROFESSIONS CODE OR OTHER APPLICABLE LAWS"]. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Initials: [In California, this notice and separate initialing required in any contract, which has an arbitration clause, "to convey real property" or "between principals and agents in real property sales transactions" - CCP 1298, or "for work on residential property with four or fewer units"- B&P 7191]
AGREEMENT. We the undersigned agree that we have read and understood Sections 1 to 3 above [and hereby amend our agreement dated , including any other dispute resolution clauses, by incorporating this addendum into it. [OR] and agree as stated above]
Signature Date Signature Date
* * * ABOUT RON KELLY: Ron Kelly has been mediating for over fifteen years. He is a nationally-recognized mediator, arbitrator, and trainer. He has played a central role in drafting and enacting many of the current California laws protecting the integrity of mediation and arbitration. He trains attorneys and business professionals in conflict resolution through the University of California Berkeley Extension and other organizations. Ron Kelly is available to serve as a neutral, and to speak, train, or consult on the design of dispute resolution contract language and systems. He may be reached at 510-843-6074 - Fax: 510-843-4439 - Email: ronkelly@igc.org
Copyright 1991-1997, Ron Kelly. All Rights Reserved. For permission to reprint, adapt, or use for commercial purposes, please call 510-843-6074.
DISCLAIMER: Every sentence in the above has a specific purpose, and is copyrighted educational material used by the author, Ron Kelly, as an instructor at the University of California Berkeley Extension. For permission to copy or related training, please call the author. If license has been granted for use, it is granted only to the intended recipient to use the above language as an instructional guide in writing specific dispute resolution language for their own contracts in consultation with an attorney, and on the condition that the recipient hold the author harmless and indemnify him from any and all claims arising in connection with the use of this language and its interpretation in any specific case. How any contract or law will be interpreted is up to the particular judge or arbitrator hearing the case, and the author makes no representations regarding specific uses of the above.
This model contract language has been reprinted (with permission) by dozens of professional organizations throughout California and used by numerous companies and business professionals. It provides a basis for detailed classroom discussion of contractual ADR agreements. It establishes by contractual agreement a structured three-step process that starts with prevention.
Any dispute which arises goes first to direct settlement negotiations between the principals, then if needed to continuing efforts at voluntary resolution with the help of a mediator. Parties using this language agree if necessary to finally use an arbitration process, in which the parties have already agreed on their neutral arbitrator or panel and on their procedural rules.
Parties commit to take specific steps to prevent disputes and to provide notice to others of problems as soon as they arise. They agree to hold regular meetings to prevent and resolve problems, rather than waiting until there's trouble and pressure for adversarial behavior. They agree to time lines and to notice requirements to keep the process moving and to ensure that it's later clear when protected settlement discussions began. There are specific procedural protections for sensitive information which may have come out in mediation discussions, since a later arbitrator need not follow normal rules of evidence in deciding what to allow in hearings. Parties agree to contractual incentives to follow through on their commitment to mediate any disputes.
This model provides for a voluntary and separate initialing of the arbitration clause (including clear consumer warnings based on language approved by statute in California) rather than having the arbitration clause simply included in boilerplate contact language.
Copyright 1997 Ron Kelly.
Copyright 1997 Ron Kelly. All rights reserved. Original content and all HTML encoding at this site are registered with the U.S. Register of Copyrights. Unauthorized commercial use is a federal crime. You may use the contents for your own personal noncommercial use. For permission to copy in any form, or to display or use for any commercial purpose, please contact Ron Kelly at 510-843-6074.