Include Arbitration and Mediation Clauses in Your Contracts

By Margarita Echevarria On Jan 10, 2024

Access any business report in New Jersey and you will confirm that the engine for productivity, the sale of goods, and employment in the state is small business. However, one of the potential lags on small business productivity is litigation.

At any point in the productive life of a small business, litigation involving a product, an employment situation, or a consumer conflict can arise. Litigation can be costly, not only related to how long it takes the parties to be “trial ready,” but also due to the potential loss of reputation related to publicity of the matters, the loss of business management time while engaged in court proceedings, and finally, the loss of business relationships depending on how caustic the dispute becomes.

One of the ways big businesses insulate themselves from these potentially expensive “drawbacks,” i.e., the publicity, distraction, and cost of legal disputes, is by planning ahead and ensuring that their employment agreements, B2B, and even terms of service agreements with their consumers include arbitration or mediation clauses, or both. The speed, efficiency, confidentiality, cost effectiveness and finality offered by these alternatives to litigation have become a normal facet of doing business today. You may already have legal counsel that helped you set up your business that you can tap to draft the appropriate clause for your contracts or invoices. And you can review, in advance, sample clauses on service provider websites so you may have an informed conversation with your legal counsel.

An important resource to businesses within the state is the NJ Association of Professional Mediators (NJAPM). For the past 30 years, NJAPM has provided the public with information on mediation. NJAPM is also a member of the New Jersey Business & Industry Association. It stands ready to provide webinars with advice on how businesses can protect themselves by adopting alternative dispute resolution (ADR) provisions in contracts and provide a directory of professional mediators, all of whom have met the rigorous credential qualifications of the state to become court approved mediators.

By anticipating, through mediation, how you will manage the inevitable disputes that will arise in the conduct of your business, you will be able to:

• Select a professional mediator with the experience and expertise needed to assist in the resolution of your dispute.
• Engage in a confidential process that avoids unwanted publicity for your business.
• Avoid the filing of legal documents that are public records to initiate resolution of your dispute.
• Schedule resolution of your dispute, taking into consideration only the calendars of the parties and the mediator in setting your mediation date. (Avoiding court calendar delays).
• Better control your costs, as some will be limited to a mediation process (prep and mediation date).
• Finalize resolution with an enforceable agreement between the parties. 

About the Author: Margarita Echevarria, Esq., executive vice president of NJAPM, is an independent arbitrator and mediator in private practice with memberships on the American Arbitration Association: Commercial (LCC) & Insurance panels, ARIAS-US Certified Arbitrator, Resolute Systems, ACAN panel, FINRA and NY & NJ Federal and State Courts Arbitration and Mediation panels.

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