Drafting the ADR clause
Drafting the ADR clause

The following Dispute Resolution guidance note provides comprehensive and up to date legal information covering:

  • Drafting the ADR clause
  • When to use ADR
  • Enforceability of ADR clauses
  • Points to consider when drafting an ADR clause
  • Why include an ADR clause in your commercial contract?
  • Which form of ADR should the contract clause specify?

Increasingly over the past decade, commercial contracts contain a provision stating that should a dispute arise out of the contract, the parties will attempt to settle it using some form of ADR. This is referred to as an ADR clause.

When to use ADR

ADR clauses

ADR clauses can be included in contracts to give parties an alternative to litigation should they find themselves in dispute over the fulfilment of the terms of the contract.

Provided the clause is prescriptive enough, parties to the contract must attempt ADR before resorting to litigation.

No ADR clause

The parties are of course free to use ADR however the dispute arises, whether or not there is a contract and whether or not there is an ADR clause. It will be up to the parties to choose which method best suits their dispute and their relationship.

Enforceability of ADR clauses

An ADR clause imposing an obligation on the parties to participate in an ADR procedure such as mediation will be binding on the parties provided it is sufficiently certain.

The ADR clause analysed for its enforceability in Cable & Wireless was:

'If the matter is not resolved through negotiation, the Parties shall attempt in good faith to resolve the dispute or claim through an Alternative Dispute Resolution (ADR) procedure as recommended to the Parties by the Centre