Blog Posts

Do You Have to Obey a Dispute Resolution Clause in a Contract?

Posted by M. Margaret Gonsalves-Sabola | Aug 10, 2018 | 0 Comments

As dispute resolution clauses in contracts become more common, more people may wonder whether they can avoid their impact. A party to a contract may prefer to file an action in court rather than go to arbitration or mediation. Generally, disputes regarding contracts that include arbitration clauses must go to arbitration in The Bahamas. As discussed below, however, the parties need to carefully analyze the dispute resolution clause with the help of an attorney.

Dispute resolution clauses describe the steps contracting parties must take to resolve any conflicts related to the contract. For example, a contract might specify that the parties should first attempt to informally resolve the dispute. If informal discussions fail, the parties should arbitrate the dispute in The Bahamas. Alternatively, the parties could choose mediation as an option. Well-drafted contracts specify the details of arbitration or mediation (such as how many arbitrators), the location of the proceedings, and the law that will apply.

In The Bahamas, the Supreme Court may stay any action filed in court that is subject to arbitration per the contract. The party desiring arbitration may file an application for a stay of the proceedings after appearing in the action but before taking further steps in the proceedings. If the court agrees to impose a stay, the parties cannot resolve the dispute in court. Instead, they must seek out arbitration. Arbitration Act, 2009.

As a result of the Arbitration Act, parties to a contract that requires arbitration of disputes cannot simply ignore the dispute resolution clause. Even if one party brings an action in court, it is likely that the dispute will go to arbitration if the defendant applies for a stay of the proceedings. The party bringing the action in court will incur the additional expense of filing the action.

In the case of dispute resolution clauses requiring steps other than arbitration, parties should attempt to follow the dispute resolution clauses first before resorting to court action. Then they can argue that court action was a last resort despite one side's diligent efforts to obey the contract. Further, conflict resolution methods such as mediation may help the parties avoid court altogether or narrow the issues in dispute between them. Mediation may cost much less and resolve the dispute much more quickly.

To summarize, parties who enter into a contract with a dispute resolution clause agree to use those dispute resolution methods before going to court. Disobeying an arbitration clause could result in arbitrating the dispute regardless, while obeying a mediation clause could result in a timely, cost-effective resolution of the dispute.

To find out more about alternative dispute resolution and mediation, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.

About the Author

M. Margaret Gonsalves-Sabola

M. Margaret Gonsalves-Sabola is a civil and commercial litigation attorney and an accredited civil and commercial mediator. Margaret has over 21 years' experience in legal practice in the United Kingdom, Jamaica and The Bahamas.


There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment