If you and the IC get into a dispute—for example, over the price or quality of the IC’s services—it is best if the two of you can resolve the matter through informal negotiations. This is by far the easiest and cheapest way to resolve any problem.
Unfortunately, informal negotiations don’t always work. If you and the IC reach an impasse, you may need help. This part of the agreement describes how you will handle any disputes you can’t resolve on your own. Three alternatives are provided: mediation, arbitration and court. Choose one.
a. Mediation
Choose Alternative A if you want to try mediation before going to court. Mediation, an increasingly popular alternative to going to court, works like this: You and the IC agree on a neutral third person to try to help you settle your dispute. The mediator has no power to impose a decision—but he or she can help you arrive at one. In other words, unless both parties agree with the resolution, there is no resolution.
Insert the place where the mediation meeting will occur. You’ll usually want it in the city or county where your office is located. You don’t want to have to travel a long distance to attend a mediation.
If the mediation doesn’t help resolve the dispute, you still have the option of going to court. If you wish, you may include the optional clause requiring the loser in any court litigation to pay the other person’s attorney fees.
Suggested Language: Alternative A
Resolving Disputes
If a dispute arises under this Agreement, the parties agree to first try to resolve the dispute with the help of a mutually agreed-upon mediator in . Any costs and fees other than attorney fees associated with the mediation shall be shared equally by the parties.
If the dispute is not resolved within 30 days after it is referred to the mediator, any party may take the matter to court.
OPTIONAL: If any court action is necessary to enforce this Agreement, the prevailing party shall be entitled to reasonable attorney fees, costs and expenses in addition to any other relief to which he or she may be entitled.
b. Arbitration
Choose Alternative B if you want to avoid court altogether. Under this clause, you and the IC first try to resolve your dispute through mediation. If this doesn’t work, you must submit the dispute to binding arbitration. Arbitration is usually like an informal court trial without a jury, but involves arbitrators instead of judges.
You and the IC can agree on anyone to serve as the arbitrator. Arbitrators are often retired judges, lawyers or people with special expertise in the field involved. Businesses often use private dispute resolution services that maintain a roster of arbitrators. The best known of these is the American Arbitration Association, which has offices in most major cities.
You may be represented by a lawyer in the arbitration, but it’s not required. The arbitrator’s decision is final and binding—that is, you can’t go to court and try the dispute again if you don’t like the arbitrator’s decision, except in unusual cases where the arbitrator was guilty of fraud, misconduct or bias.
By using this provision, then, you give up your right to go to court. The advantage is that arbitration is usually much cheaper and faster than court litigation.
This provision states that the arbitrator’s award can be converted into a court judgment. This means that if the losing side doesn’t pay the money required by the award, the other party can easily obtain a judgment and enforce it like any other court judgment—for example, have the losing side’s bank accounts and property seized to pay the amount due.
The provision leaves it up to the arbitrator to decide who should pay the costs and fees associated with the arbitration.
You must insert the place where the arbitration hearing will occur. For your own convenience, you’ll usually want it in the city or county where your office is located.
Suggested Language: Alternative B
Resolving Disputes
If a dispute arises under this Agreement, the parties agree to first try to resolve the dispute with the help of a mutually agreed-upon mediator in . Any costs and fees other than attorney fees associated with the mediation shall be shared equally by the parties.
If it proves impossible to arrive at a mutually satisfactory solution through mediation, the parties agree to submit the dispute to a mutually agreed-upon arbitrator in . Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction to do so. Costs of arbitration, including attorney fees, will be allocated by the arbitrator.
Resources
For a detailed discussion of mediation and arbitration, see Mediate Your Dispute, by Peter Lovenheim (Nolo).
c. Court litigation
Choose Alternative C if you want to resolve disputes by going to court. This is the traditional way contract disputes are resolved. It is also usually the most expensive and time consuming.
The optional language provides that if either person has to sue the other in court to enforce the agreement and wins, the loser is required by this clause to pay the other person’s attorney fees and expenses. Without this clause, each side must pay its own expenses. This can help make filing a lawsuit economically feasible and will give the IC an additional reason to settle if you have a strong case.
However, there may be situations in which you do not want to include an attorney fees provision. An IC who has little or no money won’t be able to pay the fees, so the provision is useless as far as you’re concerned. What’s worse, an attorney fees provision could help the IC convince a lawyer to file a case against you, since the lawyer will be looking to you for his or her fee instead of asking the IC to provide a cash retainer up front. If you have substantially more financial resources than the IC or think it’s more likely you’ll break the contract than the IC will, an attorney fees provision is not in your interests—and you should not include the optional clause in your agreement.
Suggested Language: Alternative C
Resolving Disputes
If a dispute arises under this Agreement, any party may take the matter to court.
OPTIONAL: If any court action is necessary to enforce this Agreement, the prevailing party shall be entitled to reasonable attorney fees, costs and expenses in addition to any other relief to which he or she may be entitled.