Tags

, , , ,

I have practiced law for over 30 years and have managed litigation and arbitrations on a global basis. I also serve as an arbitrator on panels. In the US the process is very adversarial and needlessly time consuming. This is not an accident. It is not a loser pay system as in England, so there is an incentive to sue, counterclaim or cross claim often just to increase the time and expense of the process to encourage a settlement, diffuse bad public relations, coverup internal errors or misconduct, obtain information, or to earn a greater return on the inevitable amount to be settled than the cost of the litigation (not something you can do at present). Much delay is attributable to scheduling. Attorneys take on more than they can efficiently handle to maximize their practice. Finding mutually agreeable dates either between themselves and/or the court accounts for some of this delay, although they usually don’t tell their client that the delay was their scheduling fault. Scheduling of witnesses, experts, depositions of parties also are factors. Software that would better coordinate all of this between attorneys and the courts is available but because the judicial branch is underfunded it is not happening in many courts.

Arbitration and mediation were supposed to remedy the monetarty and time cost of litigation but it has morphed into a litigation process, sometimes because that is what lawyers are used to. A lot of disputes could be fairly easily decided without the time and expense of protracted dispute resolution that exists in the US, but there is not the culture to do it. Lawyers fear having their clients do anything without their participation. There is can be good reason for this, because clients can be their own worst enemy. Other times it is just to avoid a reduction in the lawyers involvement. The latter retards more efficient dispute resolution processes.

With this in mind, I have two rules about contracts governed by US law with a venue in the US. The first rule is, do not do business or enter into some contractual relationship with someone you don’t trust. This is a universal rule, but it is not always easy to do and is counterintuitive. If you trust someone you really don’t need a contract (save for when the law requires it, as in a real property transaction). Trust can be fickle however so you enter into a contract to memorialize the transaction. The second rule is that develop and read a contract from back to the front, starting with how disputes are to be resolved. Usually the client wants to address all the substantive points, which of course are important. However, it is not how the contract will operate. If you have a dispute it will cost you time and money. In some cases the time and the money will not justify taking the matter to litigation or arbitration, or threatening to do so. When you start to look a contract in terms of remedy, than you have a better perspective about which points in the rest of the contract are important and which are less so. You can better manage your risk, relationship and contract once you do this. You can also try to have the counterparty come to an agreement to more efficiently resolve disputes through alternative processes.

Advertisements