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Alternative Dispute Resolution: October 2012 Archives

Avoiding the Pitfalls of Stepped Dispute Resolution Clauses

The dispute resolution clause in commercial contracts is very often inserted at the last minute without much attention given to the implications of the particular language contained in the clause.  It is increasingly common to see "stepped" dispute resolution clauses, whereby the parties agree to mediate disputes arising under the contract and, if mediation fails to resolve the dispute, to arbitrate.  The popularity of stepped clauses is due in part to the fact that they make a quick, inexpensive resolution possible through mediation, but provide arbitration as a fallback mechanism for dispute resolution.  While wholly reasonable on their face, stepped dispute resolution clauses can have surprising consequences when a business relationship sours.

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