On dispute resolution clauses, and design thinking: part 1.

[Sales professionals, contract negotiators, and legal managers: this series is for you.]

First: why should we care about dispute resolution clauses?

What if I told you that:

a) dispute resolution clauses can be found in most commercial contracts;

b) quite often, neither party applies their mind to the appropriate dispute resolution clause;¹ but

c) having a poorly-drafted or inappropriate dispute resolution clause can lead to multi-million dollar losses?²

Right. Now that we've gotten that out of the way, let's start with the basics.

What are dispute resolution clauses anyway?

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If you deal with contracts regularly, you would often see clauses along the following lines:³

"The Singapore courts shall have exclusive jurisdiction in relation to all Disputes. For these purposes each Party irrevocably submits to the jurisdiction of the Singapore courts and waives any objection to the exercise of that jurisdiction."⁴

Or perhaps:

"Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration shall be Singapore. The Tribunal shall consist of 1 arbitrator. The language of the arbitration shall be English."⁵

These are what we call dispute resolution clauses. In the event that a dispute arises in relation to the contract, the dispute resolution clause determines where the dispute should be heard and decided.

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In the next part, I will discuss the purpose behind such clauses - stay tuned.