Disputes are best managed before they even begin. Too many executives write contracts that only focus on the day-to-day deliverables, leaving the off-ramps vague or relying on a boilerplate "go straight to litigation" clause.
The most effective risk management strategy is drafting a clear, staged escalating dispute resolution process into every commercial agreement.
A well-structured clause requires parties to exhaust peaceful avenues first:
𝗦𝘁𝗲𝗽 𝟭: 𝗘𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲 𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻: Compel both sides to get in a room together. Require representatives or CEOs to sit down 𝘄𝗶𝘁𝗵𝗶𝗻 𝗮 𝘀𝗽𝗲𝗰𝗶𝗳𝗶𝗰 𝘁𝗶𝗺𝗲𝗳𝗿𝗮𝗺𝗲 𝘁𝗼 𝗴𝗲𝗻𝘂𝗶𝗻𝗲𝗹𝘆 𝗮𝘁𝘁𝗲𝗺𝗽𝘁 𝘁𝗼 𝗿𝗲𝘀𝗼𝗹𝘃𝗲 𝘁𝗵𝗲 𝗶𝘀𝘀𝘂𝗲.
𝗦𝘁𝗲𝗽 𝟮: 𝗙𝗮𝗰𝗶𝗹𝗶𝘁𝗮𝘁𝗲𝗱 𝗠𝗲𝗱𝗶𝗮𝘁𝗶𝗼𝗻: If executive negotiations fail, bring in a neutral third-party mediator to facilitate a structured conversation, also within a specific timeframe - you don't want to let it linger on.
𝗦𝘁𝗲𝗽 𝟯: 𝗔𝗿𝗯𝗶𝘁𝗿𝗮𝘁𝗶𝗼𝗻 𝗼𝗿 𝗟𝗶𝘁𝗶𝗴𝗮𝘁𝗶𝗼𝗻: Only after collaborative efforts are exhausted should the parties escalate to binding arbitration or court.
𝗧𝗵𝗲 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆: 𝗔 𝗽𝗿𝗼𝗽𝗲𝗿𝗹𝘆 𝗱𝗿𝗮𝗳𝘁𝗲𝗱 𝗱𝗶𝘀𝗽𝘂𝘁𝗲 𝗿𝗲𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻 𝗽𝗼𝗹𝗶𝗰𝘆 𝘀𝗵𝗶𝗳𝘁𝘀 𝘁𝗵𝗲 𝗳𝗼𝗰𝘂𝘀 𝗳𝗿𝗼𝗺 𝗯𝗹𝗮𝗺𝗲 𝘁𝗼 𝗽𝗿𝗼𝗯𝗹𝗲𝗺-𝘀𝗼𝗹𝘃𝗶𝗻𝗴, 𝗽𝗿𝗼𝘁𝗲𝗰𝘁𝗶𝗻𝗴 𝘆𝗼𝘂𝗿 𝗰𝗼𝗺𝗽𝗮𝗻𝘆'𝘀 𝗿𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝗰𝗲, 𝗿𝗲𝗽𝘂𝘁𝗮𝘁𝗶𝗼𝗻, 𝗳𝗼𝗰𝘂𝘀 𝗮𝗻𝗱 𝗰𝗮𝗽𝗶𝘁𝗮𝗹.
Originally published on LinkedIn.