Dispute Resolution Clauses
Can’t Be Ignored
Proceed with caution!
It is not uncommon to find dispute resolution clauses in
contracts of all kinds. They often lurk towards the end of
commercial contracts, or in the “fine print” of consumer
agreements. Many folks do not give them much, if any, notice
until it’s too late.
What do these clauses say? Sometimes, dispute resolution
clauses are specifically intended to ensure that all possible
steps are taken, or at least explored, before either party may
seek the assistance of the courts.
Such clauses may simply require that the aggrieved party
give notice to the other party of the complaint and provide a
limited time for the other party to “cure” the alleged breach.
Other clauses may require that the parties attempt to resolve
any issues between them cooperatively through mediation.
Yet other clauses may require that all disputes be resolved
out of court through binding arbitration, often invoking the
regimes set out in the relevant legislation (for example, in
Manitoba, The Arbitration Act).
Finally, some contracts may include all of these clauses, to
be followed in order.
Why should one be wary of dispute resolution clauses in
contracts? After all, we commonly encourage our clients to
use settlement mechanisms to resolve disputes. The problem
is that an aggrieved party may find that its hands are tied
and that it must go through every contractual hoop before
being able to sue the other party. Worse yet, under certain
circumstances, dispute resolution clauses may work to oust
the jurisdiction of the courts in their entirety, forcing the
wronged party to live with the results of a flawed or inappropriate
process.
It is sometimes the case that these clauses are constructed
to favour the interests of one party over another. For
example, a service provider may include in its
standard agreement that any disputes are to be arbitrated by
a person to be selected by the service provider, rather than by
a wholly disinterested neutral person.
What can parties do to avoid these problems? Care must
be taken at the outset to consider what dispute resolution
provisions are properly adapted to the parties’ needs. If
urgent court-ordered relief might be required – such as an
injunction to prevent further wrongful activities – one might
want either to scrap the inclusion of dispute resolution
clauses or carve out exceptions where they are not to apply.
Consideration also has to be given to the possibility of
uneven bargaining power. Sometimes only the threat of legal
action, and the attendant negative publicity it might engender,
will be of benefit. Removing the opportunity to go to court
through a dispute resolution provision may unduly reduce
the aggrieved party’s negotiating position. Alternatively, both
parties might well benefit from closed and confidential processes
such as mediation and/or private arbitration.
In other words, boilerplate language must be avoided
and all parties must review proposed dispute resolution
provisions carefully to ensure they are suitable to meet the
parties’ needs.
Steven Z. Raber is a Winnipegbased
lawyer, trained mediator
and registered trademark agent at
Fillmore Riley LLP. He can be reached
at stevenraber@fillmoreriley.com or
204-957-8304.
By Steven Z. Raber
LEGAL
STILL LIFE PHOTOGRAPHY / SHUTTERSTOCK.COM
PILING CANADA 81
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