Dispute resolution clauses

Authored by the LexisNexis Legal Writer team.

A dispute resolution clause requires or permits the parties to an agreement to take certain steps to resolve disputes arising under or in relation to the agreement. One of the main commercial functions of such a clause is to ensure that the parties have exhausted non-litigious methods of dispute resolution before resorting to litigation (which is likely to be costly and time-consuming for all parties to the dispute). Another important function is to allow the parties to resolve disputes privately and confidentially, without the dispute becoming a matter of public court record.

A dispute resolution clause is not necessarily appropriate for every type of agreement. However, in any commercial arrangement, the parties should consider the potential for disputes or disagreement over key issues and how best to resolve them. In many cases, a dispute resolution clause can help to give the parties a greater degree of certainty about how disputes will be resolved and prevent disputes escalating unnecessarily.

Dispute resolution clauses that provide for the resolution of disputes by arbitration may be subject to state and territory commercial arbitration legislation (eg, the Commercial Arbitration Act 2010 (NSW), Commercial Arbitration Act 2011 (Vic), and their equivalents in other states and territories).