Prelitigation Dispute Resolution Clauses: Getting the Benefit of Your Bargain


Originally published in Franchise Law Journal, Volume 31, Number 1, Summer 2011.

Alternative dispute resolution is often touted as a necessity in the American legal system to avoid the high monetary, time, and people costs of litigating. Given these benefits, one would think that prelitigation dispute resolution clauses—contractual clauses that require parties to mediate or negotiate before they resort to litigation would be routinely enforced. The enforcement of such clauses, however, is not a foregone conclusion.

These clauses are sometimes present in franchise agreements and usually take the form of requiring either party-to party negotiation or third-party neutral assisted mediation. Litigants attempting to enforce such clauses usually assert that compliance is a condition precedent to initiating litigation and move either to dismiss or for summary judgment to effectuate these clauses. Some courts are receptive to enforcing prelitigation dispute resolution clauses based on the parties’ agreement, but others are more ready to ignore the clauses and send the matters on their way to litigation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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