Dispute resolution clauses appear in most contracts you will see. They are not always the same, but they matter.
In general terms, the clauses require the parties to a contract to exhaust various alternative dispute resolution (ADR) procedures (like mediation or expert assessment) before they can start court proceedings.
For a court to enforce a dispute resolution clause and tell the parties that court proceedings are not open to them until they have exhaused the dispute resolution process, it must be satisfied of 3 things:
1/ The ADR process must be sufficiently certain;
2/ The administrative processes for selecting a party to resolve the dispute must be clear;
3/ The process or model of ADR process should be sufficiently clear.
In Taylor Wimpey UK v Harron Homes Ltd (2020) the agreement contained a dispute resolution clause that obliged the parties to refer any disputes to expert determination, which is a form of ADR procedure.
The dispute resolution clause also set out the procedure for:
1/ Invoking the clause and starting the expert determination procedure;
2/ Selecting and appointing an expert;
3/ Dealing with any disputes on selecting an expert;
4/ Determining any dispute.
In this case, a dispute arose and whereas one party tried to get the dispute process going, the other simply applied to the court for pre-action disclosure of certain documents. The Judge dismissed the claim for a number of reasons, one of which was the dispute resolution clause.
Noting that the parties had, by including a dispute resolution clause in the agreement, had agreed on the process to resolve disputes, the Judge explained the practical benefits of ADR for businesses:
