…..in the event of any dispute arising out of the interpretation or performance of this agreement, parties shall resort to arbitration to be conducted by a single arbitrator to be appointed by the parties, with the seat of arbitration in Lagos and governed by the laws of Lagos state….

The above is a short and simple sample of what is always regarded as an ‘Arbitration Clause’ in any agreement between parties.

Due to the multi-faceted nature of business transactions all over the world, there is the need for parties to come together to agree on terms and conditions as to how a particular business venture is expected to be carried out. These agreements are then reduced into writing, and parties append their signatures signifying the intention of being bound by the terms as stipulated in the agreement.

As simple and straightforward as this looks, we are all humans and the peculiarity of that very important fact is always the presence of disputes and disagreements. In the event of disputes arising from contracts, the conventional thing for the aggrieved party to do is to approach the courts to seek redress for any wrongdoing or harm that has been done.

But the reality is spending 3 years in court over a dispute of about #20,000,000(twenty million naira) with the potential of being elongated for a period which no one really knows.

Alternative dispute resolution is simply the answer to this problem. Facing the facts, although nobody actually enters an agreement with the aim of breaching the agreement, some circumstances which are not initially envisaged may arise that renders the agreement contentious. So rather than resort to the traditional mode of litigation in court, alternative dispute resolution mechanisms can be employed to ensure the mechanism of business runs smooth and efficiently.

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Although what is contained above is an arbitration clause, there are other forms of alternative dispute resolutions which include negotiations, mediation and conciliation. However, the best form of alternative dispute resolution still remains arbitration, as it is legally binding and the decision of the arbitrator is usually final.

The practice of alternative dispute resolution is already a major one, the importance cannot be over-stated especially with startups, entrepreneurs and owners of small companies who will probably be in a rush to sign any agreement because of their weak bargaining power.

This will save your life because in the event that a dispute arises, not only is it faster, it is comparatively cheaper to the whole court process. The interesting part of this alternative is the informality, and prior existing relationships between the parties are preserved. Parties are also able to decide on the procedures which include the venue, time for meetings and the proceedings of the whole process and the losing party bears the cost!!

So, make sure that you do not get carried away with the euphoria of signing a groundbreaking contract, and make sure that you save yourself from the heartache of sitting through a boring court session coupled with the numerous adjournments, and paying continuous appearance fees to your lawyer as you can easily arbitrate and get on with your business.


Culled from Nairametrics