Contracts include a variety of clauses and terms that you should be aware of before you sign. No matter which side of the matter you’re on, these terms can impact you if there is ever anything that goes amiss with the situation. One of the important things to review is what type of resolution clause is present in the contract in the event of a dispute.

Many contracts have clauses that limit the recourse that you have to count on if the contract is breached. In most cases, the contract will stipulate that you must use alternative dispute resolution (ADR) methods, such as mediation or arbitration to resolve anything that goes wrong — before (or in place of) litigation. This can be either a burden or something welcome, depending on your views. Most people who enter into contracts will try to work things out before they turn to litigation since it is usually in the best interests of everyone involved in the situation to try to find a suitable resolution together before involving the courts. 

If you do have to use the ADR method specified in the contract, pay close attention to the payment terms:

  • Do both parties split the cost?
  • Is one party solely responsible for the cost?
  • Who chooses where to take the matter?

While these questions might seem minor, they could be a huge factor in a decision regarding whether to sign the contract or how to handle any breaches. It’s always best to have an attorney review the terms of a contract thoroughly before you sign so you can ensure it offers the protection you need. You may have to return to the negotiating table if the contract isn’t up to par.