New Jersey business owners know that good contracts can go a long way toward the success of a business. Whether you are creating contracts as you start your business or renegotiating contracts after you are already in business, the way you negotiate can make a huge difference in the outcome.
Try dispute resolution before litigation
You cannot approach a contract negotiation without acknowledging that future disputes could occur. Many contracts have a dispute resolution clause.
This is a clause declaring that you agree to participate in an alternative dispute resolution proceeding, such as mediation or arbitration, before proceeding to litigation.
Alternative dispute resolution has many benefits. It can save both sides time and money and often results in a solution to the dispute, with the added benefit of preserving the business relationship.
Dispute prevention clauses
There is also a clause called a dispute prevention clause that you could consider putting into your contracts. This clause requires both parties to regularly meet or communicate for status updates and to discuss any issues that have arisen.
A dispute prevention clause may not be appropriate, depending on your industry, but it is something to keep in mind.
Contingency clauses are extremely beneficial to have in your contracts. No matter what your industry, life is unpredictable. As we have all seen over the past few years, things can change in an instant and completely disrupt your business operations or a project you have been working on.
Have backup plans for any potential issues and come to a mutual agreement on how they will be handled. The idea behind contingency clauses is to provide incentives for parties to adhere to the contract or risk penalties.
In addition to using a mediator or arbitrator for resolving your disputes, having advice and guidance from a legal professional when drafting or negotiating your contracts can help prevent future problems and minimize the risk to your business.