Exploring Alternative Dispute Resolution – No Need for Court
When it comes to handling disputes arising from business agreements, many people believe that the only option is to go to court. However, there are alternative dispute resolution (ADR) methods available that can effectively resolve conflicts without the need for a lengthy and costly litigation process. In this article, we will discuss some of the ADR methods, including negotiation, reconciliation, collaboration, and contractual negotiation. Highlighted are their benefits, crucial for businesses navigating through growing economies. In the next article, we further explore arbitration, mediation and court-annexed mediation: link.
Understanding Alternative Dispute Resolution (ADR)
ADR, including arbitration, mediation, reconciliation, negotiation, and traditional dispute resolution mechanisms, is recognized under the Constitution of Kenya (Article 159). These methods provide opportunities to negotiate and settle disagreements outside of court, promoting access to justice and preserving relationships between the parties involved.
But first, before delving into the issue of ADR aspects, one must stress the importance of effective contractual negotiations highlighted below.
Contractual Negotiations
This type of negotiation occurs where contractual engagements are concerned or the formalisation of negotiations is captured in contracts. This can be between businesses, or between a business and its customers, suppliers, or partners. The goal of contractual negotiation is to create a mutually beneficial arrangement that meets the needs of all parties
involved. The main goal of contractual negotiation is for each party to be satisfied with the rights and obligations assigned to them.
Why Consider Contractual Negotiations?
∙ To establish clear expectations and minimize misunderstandings. By negotiating the terms of a contract, both parties can ensure that they are on the same page when it comes to deliverables, timelines, payment terms, and other important details.
∙ To build stronger relationships between businesses. By engaging in a collaborative process to reach an agreement, both parties can develop a better understanding of each other’s needs and priorities. This can help to build trust and goodwill, which can be beneficial for future business opportunities.
∙ Additionally, contractual negotiation can help to protect the interests of business owners. By negotiating favourable terms and conditions, business owners can ensure that they are not taking on excessive risk or liability. They can also ensure that they are receiving fair terms within the contract.
Some of the important contractual clauses that one can expect and that we consider should be given particular attention include (Attribution: Lexology.com):
∙ Liability clause – it defines the extent and limits of each party’s responsibility for any loss, damage, or harm that may occur during the performance of the contract. It is important to review this clause carefully to avoid taking on more risk than necessary or expected.
∙ Indemnity clause: This clause is a promise from one party to compensate the other party for certain losses or damage suffered by the other party during the performance of the contract. It is important to review this clause to understand what scenarios are covered by the indemnity and the conditions for claiming it.
∙ Term and Termination clause: This clause specifies the duration of the contract and the circumstances under which it can be ended by either party. It is important to review this clause to know how long you are committed to the contract and the available exit options, if needed. The consequences of termination may also be stated here, for example, loss of a deposit, or payment of a penalty amount.
∙ Price and Payment Terms: This clause sets out the amount and method of payment for the goods or services provided under the contract. It is important to review this clause to ensure that you agree with the payment schedule, currency, interest, penalties, and other terms related to payment.
∙ Obligations and Warranties – the clause outlines the duties and promises of each party under the contract. When reviewing or negotiating this clause, the goal is to ensure you can fulfil your obligations and that you are satisfied with the warranties offered by the other party.
∙ Intellectual Property: This clause defines who owns and who can use any intellectual property (such as patents, trademarks, copyrights, etc.) that is created, used, or disclosed under the contract. The essence of reviewing or negotiating this clause is to protect your intellectual property rights and avoid infringing on those of others.
Having covered the issue of contractual negotiations, it is important to consider the issue of disputes as these may occur, during or following the performance of the contract. The theory of incomplete contracts underscores the fact that parties cannot anticipate each and every eventuality of a contractual engagement. Inevitably, sometimes, contractual relationships break down and dispute resolution becomes crucial. We consider the ADR processes from the least formal and binding to the most onerous and costly processes.
- Negotiation
Negotiation is a vital skill for conflict resolution that aims at reaching mutually beneficial agreements. The parties involved in a dispute attempt to reach a mutually acceptable agreement through direct communication and bargaining. It is an informal and flexible method, where the parties have control over the process and outcome. Negotiation can take place between individuals, businesses, or even between lawyers representing their clients. It is often used as a first step before resorting to more formal ADR processes.
What you need to know about negotiation:
∙ Parties communicate directly with each other to resolve the dispute. ∙ It focuses on reaching a compromise or mutually beneficial solution. ∙ The parties have control over the process and outcome.
∙ It can be conducted with or without the assistance of a neutral third party.
- Conciliation
Conciliation on the other hand involves the intervention of a neutral third party, the conciliator, who facilitates communication and assists the parties in finding a resolution. The conciliator does not impose a solution but helps the parties explore options and reach an agreement. The conciliator may provide suggestions, and advice, or propose compromises to bridge the gap between the parties. The process is typically confidential and less formal than a court proceeding.
What you need to know about conciliation:
∙ A neutral conciliator assists the parties in resolving their dispute.
∙ The conciliator facilitates communication and promotes understanding. ∙ The conciliator may offer suggestions and propose compromises.
∙ The goal is to reach a voluntary agreement between the parties.
∙ The process is less formal and more flexible than litigation.
- Collaboration
Collaboration, also known as collaborative law or collaborative practice, is an ADR method primarily used in family law and civil disputes in Kenya. It involves the parties and their lawyers committing to work together cooperatively and transparently to find a mutually satisfactory resolution. The collaborative process aims to preserve relationships and
encourages creative problem-solving. If an agreement cannot be reached, the parties may need to retain new counsel and proceed to litigation.
What you need to know about collaboration
∙ Both parties and their lawyers commit to a cooperative approach.
∙ Open and transparent communication is essential.
∙ The process emphasizes problem-solving and preserving relationships. ∙ Other professionals, such as financial experts or therapists, may be involved. ∙ If the collaborative process fails, the parties may need to pursue litigation.
It’s important to note that the availability and suitability of negotiation, conciliation, and collaboration can vary depending on the nature of the dispute, legal requirements, and the preferences of the parties involved. Each method has its strengths and may be more appropriate in certain circumstances. Consulting with an experienced ADR professional or a lawyer can provide further guidance on selecting the most suitable approach for a specific dispute. We at AMMLAW advocate for the drafting of an agreement following the negotiation, conciliation or collaboration processes.
Article by Elizabeth Museo Muema – Admin & Communications, AMMLaw