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Contracts should spell out what happens in a dispute

Hubbard Snitchler & Parzianello

If it is drafted well, the core of an important business contract will explain each side’s rights, obligations and responsibilities clearly and completely.

Well-drafted contracts do cut down on the possibility of litigation. However, the reality is that even with the best of drafting, there can still be disputes between the parties.

This is why it is important for the contract itself to set out what happens if there is a disagreement about the terms. Clear provisions about dispute resolution can save a business a lot of both money and other resources, such as time and effort.

Choice of law provisions can mean all the difference in a dispute

It can be easy to overlook, but a business in the greater Detroit should strongly consider which body of law it wants to apply in the event of a dispute, especially if they do business in a number of jurisdictions.

A contract is the right place to negotiate and then spell out a clear answer to this question. The answer can make a big difference in the outcome of a dispute. After all, different jurisdictions have their own statutes and court cases, and these variations can determine how a court will decide a case.

A contract can also address the correct forum for litigation

The contract can also specify which courts will hear a case if there is litigation, a step which in the legal world is referred to as choice of forum. Again, a business may have reasons to choose one court system over another.

On a purely practical level, a business may want to pick as the forum a nearby court with which the business and its attorneys are familiar.

On a related point, a contract can also require that the parties resolve disputes through binding arbitration and set out the procedures for doing so.

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