This clause sets up a step-by-step process you must follow before going to court or arbitration. Typically, you start with negotiation between senior managers, then move to mediation (where a neutral person helps you find agreement), and only then can you sue or arbitrate. This matters because it saves time and money—most disputes settle in earlier stages, and courts in both the UK and US favour contracts that show parties tried to resolve things themselves. For example, if you skip negotiation and go straight to court, the other party might argue you breached the contract's terms, and a judge could dismiss your case or order you to pay their legal costs.
Push back if the early steps (negotiation and mediation) have vague timelines or no clear deadlines—you could get stuck in endless discussions. Ask for specific timeframes: "negotiation must conclude within 30 days, mediation within 60 days." Also check whether the costs of mediation are split equally; if you have to pay all of it, the other party has no incentive to settle. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause sets up a step-by-step process you must follow before going to court or arbitration.
Why should I care about this clause?
Typically, you start with negotiation between senior managers, then move to mediation (where a neutral person helps you find agreement), and only then can you sue or arbitrate.
What are my options?
This matters because it saves time and money—most disputes settle in earlier stages, and courts in both the UK and US favour contracts that show parties tried to resolve things themselves.
How does this affect small businesses?
For example, if you skip negotiation and go straight to court, the other party might argue you breached the contract's terms, and a judge could dismiss your case or order you to pay their legal costs.