By Robert Harris*
Contracts And Disputes: Hoping For The Best, Preparing For The Worst
All golf related enterprises at one time or another commit themselves to legally enforceable contract terms. It may be an employment agreement, a purchase agreement, a lease, or one of dozens of other kinds of business transactions
More often than not, once the agreement is signed, it is tucked away in a drawer or a filing cabinet, never to be looked at again….until a dispute arises. At that point, the parties run to the contract to review perhaps the most important language in the document: the dispute resolution provision.
Most contracts include language that dictates the rights and obligations of the parties in the event of controversy. The dispute resolution provision can address a number of important issues, including:
• Limitations on the type and amount of damages that a party may recover, including punitive damages
• Guidance regarding the ability of a party to recover attorneys’ fees
• The geographical location where a lawsuit may or must be brought
• Whether the lawsuit will be presented to a judge or a jury
• Whether, instead of bringing a lawsuit, the parties will submit the dispute to arbitration or mediation (and, if so, what procedural rules will apply)
These questions can have enormous consequences to a party when a dispute arises. Based on the contract language, they can substantially tilt the economic ramifications of a dispute from one party to another. Indeed, in some instances, the dispute resolution language effectively determines whether pursuing or defending a claim for breach of an agreement is economically feasible.
Too often, contracting parties do not understand the consequences of the dispute resolution language to which they are agreeing. Their attorney focuses his or her efforts on explaining the economic terms of the agreement, to make sure it accurately captures “the deal.” The dispute resolution language, on the other hand, is treated as an orphan, because no one wants to focus on what can happen if controversy later arises.
In some instances, an attorney who has expertise in transactions lacks experience in litigation. Without that experience, or input from a colleague who understands what happens when a dispute arises, the attorney lacks the skill set to insist on dispute resolution language that will best protect the client in the event of controversy.
Unlike some clothing, one size does not fit all, yet in this day and age of word processing, dispute resolution language is casually transferred from other contracts that may not be suitable for the transaction at issue. Indeed, in preparation for this article, I encountered on the website of a national golf organization a template employment agreement for its members to use as a guideline when contracting to fill a certain senior level position. Of all the issues outlined above that should be considered in a dispute resolution provision, this particular template agreement addressed only one, providing that a dispute between the employer and employee would be submitted to arbitration in accordance with the rules of the American Arbitration Association.
Don’t get me wrong. I understand that this template was proposed as a “guideline.” As far as dispute resolution provisions are concerned, there clearly are circumstances in which parties to an employment agreement may not wish to address issues such as damages limitations or the recoverability of attorneys’ fees. Moreover, in many cases, it is wise to submit employment disputes to arbitration, and the American Arbitration Association certainly is a reputable organization (indeed, I serve as an arbitrator for the AAA).
However, when an organization offers such contract language to its entire membership constituency, it implicitly invites the contracting parties to adopt the language without critical analysis about its appropriateness for their particular situation. Perhaps there should be language that addresses the magnitude and types of recoverable damages. Perhaps mediation should be attempted prior to arbitration. Perhaps the rules of another arbitration organization are best suited to the circumstances of the transaction at issue.
Prudent businesses should devote careful thought to a dispute resolution provision and not just take it off the rack simply because it’s convenient.
This article may constitute Attorney Advertising in some jurisdictions. It is for informational purposes only and does not constitute legal advice.
Originally posted by RobertHarris
on 28 Jul 2011.
All contributors: LynnwoodBrown
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