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Friday
Aug232002

Stay Out of Court with This Strategy

What would you say if I told you there was a strategy, if used properly, that could keep you out of court? A strategy that could avoid the time, expense and uncertainty of litigation? There is.

That strategy is arbitration. I have no idea why more businesses aren't taking advantage of this efficient, effective, enforceable method of resolving disputes and require arbitration in all of their agreements. Better yet, go one step further, require the people that you employ and the people with whom you do business to notify you of any problems and give you an opportunity to correct the problem before they bring a claim.

You can do this. It is perfectly legal and, if done properly, it is enforceable.

You have the ability to establish the rules by which your employment relationships and your business relationships are governed. These are called contracts. There are certain limits to what you can do in your contracts, based upon public policy. But if you stay within these limits, your agreements are enforceable.

DON'T: Don't continue to expose your business to the expense and the uncertainty of the judicial system. Create arbitration provisions to include in all of your agreements with your employees, your vendors, your customers and everyone else that may come in contact with your business.

DON'T: Don't draft an arbitration provision that is unfair to the other party or gives you an undue advantage. Courts can refuse to enforce one-sided provisions. You do not want to lose the time-saving and cost-saving benefits of arbitration by drafting an oppressive provision.

DO: Do include a fair and reasonable arbitration provision in your employment applications. Since these provisions are not found in "form" applications, you should have an application created for your business that includes this and a number of other preventative legal strategies. Have your application reviewed by experienced legal counsel to make sure it complies with recent laws, regulations and judicial rulings.

DO: Do create an arbitration agreement to be signed by your current employees and your new hires. This needs to be handled delicately in order to survive judicial scrutiny and to avoid upsetting your current workforce. Properly worded and properly presented, however, an arbitration agreement is in the best interest of both your business and your employees. Arbitration is a tremendous preventative legal strategy but it must be employed correctly.

DO: Do include an arbitration provision in your credit applications, credit agreements, sale agreements, sale acknowledgments, purchase orders, purchase acknowledgements, warranties and other contracts.

DO: Do include a provision requiring each party to notify the other party of any potential claims and give that party an opportunity to fix the problems before bringing a claim.

Arbitration can be an efficient, cost-effective method of resolving disputes. You can agree in advance with your employees and those with whom you do business to arbitrate any disputes that may arise. In order to be enforceable, however, those agreements need to be fair and balanced and they must comply with the various court rulings on enforcing arbitration agreements. The time spent with experienced legal counsel in drafting arbitration provisions can be time very well spent.

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