Contract Provisions that can Prevent Litigation

When you enter into a contract with another party, one of your main goals should be to include provisions that will help avoid litigation if a dispute arises. Below are a few ways that will not only create a good working relationship with the other party, but also minimize the likelihood that the courts will be involved in resolving issues that arise under the agreement:


  • Status reviews. The failure to communicate effectively is often the cause of many disputes. Having status-review conference calls can promote communication between the parties and allow them to address issues as they first arise and before they have snowballed into major problems. Inserting a status review clause in the contract helps ensure that the parties make the effort to schedule the conferences.


  • Higher-management notification. An effective tool for resolving disputes is to include a contract provision that requires the parties to consult with higher-management when disputes occur. Getting key personnel involved often allows the parties to settle the disagreement before a lawsuit is filed. This is especially true if the dispute arose due to personal conflicts or other personal hidden agendas.


  • Evaluations. In certain types of contracts it can be helpful to require the parties to obtain a preliminary, non-binding evaluation by a neutral party of their opposing positions. This process often provides one party, if not both of them, with a reality check. It can also promote the settlement of the dispute before attorneys get involved and things get heated.


  • Attorney’s fees award. As a way to encourage settlements, the contract can include a clause that awards attorney’s fees to a party that makes an offer to settle that is rejected. Typically, the party that rejected the settlement offer must recover a certain percentage higher than the rejected settlement offer at trial or it is liable for the other party’s reasonable fees and expenses. As you might guess, this can be strong motivation for settling disputes.


At Nielsen Law Group, we will not only help assist with what is the best structure for your business, but will also aid with the additional details that will foster a strong foundation and get you started on the road to success. Whether you need assistance forming your new business entity or establishing a more sophisticated corporation or non-profit organization we will be able to guide you the entire way. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.