How to Draft Effective Alternative Dispute Resolution Clauses

Crafting alternative dispute resolution clauses in contracts can be a lengthy and inefficient process. It’s also a critically important one, as Kelly Turner, Senior Counsel of the American Arbitration Association, discussed during a recent webinar with Today’s General Counsel.

“Generally speaking, whether you’re the outside lawyer or the in-house counsel, you want to ensure that the clause you put together for your client or for yourself in your contract gives you what you are looking for, particularly for an arbitration,” Turner said.

Here are five key takeaways from her presentation on effective alternative dispute resolution (ADR) clauses:

1. The Importance of Well-Drafted Arbitration Clauses: A poorly drafted clause can lead to inefficiencies, delays, and potential enforceability issues in the arbitration process. A well-drafted clause ensures a fair, efficient, and enforceable arbitration.
2. Clarity of Intent: The clause should clearly specify the desired method of dispute resolution (arbitration or mediation) and the governing rules or procedures. Ambiguity can lead to disputes and delays.
3. Authority of the Arbitrator: The clause should clearly grant the arbitrator the authority to issue a binding award. This helps avoid disputes over the arbitrator’s jurisdiction.
4. Enforceability of the Award: The clause should ensure that the arbitration award is enforceable in court. This is crucial for ensuring that the parties comply with the award.
5. Addressing Potential Issues: Common problems in arbitration clauses include unclear intent, lack of authority for the arbitrator, and enforceability issues. Understanding these potential pitfalls can help in drafting more effective clauses.

The webinar concludes with a brief demo of the ClauseBuilderAI tool, which can build custom alternative dispute resolution clauses using artificial technology.

Download a recording of the webinar here.