Lawyers who draft commercial contracts should always anticipate that something might go wrong during the performance of the contract. Most commercial contracts run smoothly, but some do not. It is part of the lawyer’s job to anticipate problems and draft clauses that protect their client if they do.

Most commercial contracts contain some kind of ‘dispute resolution’ clause. This is a clause which sets out, expressly, what must happen if a dispute arises between the parties. In other words, it sets out a procedure for trying to resolve the dispute.

Many parties to commercial contracts incorporate an alternative dispute resolution clause into their contract; for example, that the parties will use a mediation procedure if a dispute arises. The following is an example of this kind of commercial contract clause:

“Any disputes arising under this Agreement shall be resolved in the first instance through the Mediation Procedure described in clause 20 herein."

A recent English case, Taylor Wimpey UK v Harron Homes Limited [2020] EWHC 1190, has highlighted the position that, if a contract contains this kind of alternative dispute resolution clause, the parties must engage in this kind of dispute resolution before formal legal proceedings can be started. In reaching that decision, the court relied on the earlier court judgment in the case of Ohpen Operations UK Limited v Invesco Fund Managers Limited [2019] EWHC 2246.

Essentially, therefore, if a commercial contract contains a clear and valid alternative dispute resolution clause, the parties must follow that clause and use the alternative procedure before formal legal proceedings can be commenced. In other words, such clauses are not optional. If a party ignores this and commences legal proceedings, they may face a very large bill for legal costs.


Can you find a phrase or word in the text which means: (the Answer Key is below)

1. To fulfil all the obligations you have agreed under a contract

2. To work well without any problems or to go as planned.

3. To present information, including contractual rights and obligations, in writing (or speech) and to do so clearly

4. To settle, or put right, a problem or disagreement which has happened.

5. Before you do anything else [Note: you will find this phrase in the example contract clause in the text]

6. In this document [this word is also in the example contract clause]

7. To bring attention to something

8. To do or take part in something

9. Done in an official way, or a way that is expected in a particular situation

10. Something you can choose to do or not do.

Answer Key

1. the performance of the contract (to perform a contract)

2. (to) run smoothly

3. (to) set out

4. (to) resolve the dispute

5. in the first instance

6. herein

7. (to) highlight

8. (to) engage in

9. formal

10. optional

Note: This article is intended for educational and study purposes only. It is not intended to be an authoritative statement of the law. If you need legal advice, you should always consult a lawyer.

© Cambridge Legal English Academy 2020

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