The Dispute Resolution Clause You Already Signed: Reading Your Contract Before a Fight Starts
This article is for general informational purposes only and is not legal advice, does not create an attorney-client relationship, and should not be relied on as a substitute for advice from qualified counsel about your specific situation. If you have questions about how these issues apply to your business, you should consult with a licensed attorney in your jurisdiction.
Most businesses do not think about their dispute resolution clause until they need it, which is exactly the wrong time to read it for the first time. Buried in the back pages of nearly every commercial contract, usually a few paragraphs from the signature block, is language that already answers several questions a business will urgently want answered the moment a dispute breaks out: where can this be resolved, how, and on whose terms. By the time a conflict arises, those terms are no longer negotiable. They were locked in the day the contract was signed.
Reviewing dispute resolution language before signing, rather than after a problem develops, is one of the highest-leverage things a business can do in contract review. It costs little to review and can save significant time, expense, and leverage later.
Arbitration vs. Litigation: What You Actually Agreed To
The first thing to identify is whether the clause requires arbitration, litigation in court, or some hybrid such as mediation followed by arbitration. Each path carries real tradeoffs. Arbitration is often faster and more private than litigation, but it typically limits appeal rights, may restrict the scope of discovery, and can involve arbitrator fees that shift cost in ways a courtroom proceeding would not. Litigation preserves broader procedural rights and a more familiar appellate process, but tends to move slower and produces a public record.
Neither option is categorically better. The point is to know which one a contract has already selected before a dispute forces the question, because switching paths after a conflict starts is rarely an option the contract allows.
Venue and Governing Law: Where and Under What Rules
A dispute resolution clause typically also specifies venue (where a dispute will be heard) and governing law (which state's law applies to interpreting the contract). These provisions matter more than they appear to on first read. A Michigan business that signs a contract designating venue in another state, or governing law from a jurisdiction with less favorable rules, may find itself litigating far from home under legal standards it did not anticipate.
Businesses negotiating contracts of any size should treat venue and governing law as negotiable terms, not boilerplate. Insisting on Michigan venue and Michigan governing law where possible keeps disputes closer to home and under more familiar legal rules, and it is a request most counterparties will at least discuss if raised during negotiation rather than after a dispute is already underway.
Notice and Cure Requirements
Many commercial contracts require written notice of a breach, delivered to a specific address or contact, before either party may pursue a remedy. Some go further and require a defined cure period during which the breaching party has an opportunity to fix the problem before the other side can terminate the agreement or pursue a claim.
These provisions are easy to overlook until a business needs to act quickly, but skipping a required notice step can undermine an otherwise valid claim or, under Michigan common law and depending on the specific contract terms, forfeit a remedy the business would otherwise have had. Knowing these requirements in advance, rather than discovering them mid-dispute, keeps a business from making a procedural misstep at the worst possible time.
Fee-Shifting and Cost Allocation
Some contracts include a prevailing-party attorney fee provision, meaning the losing side in a dispute may be required to pay the winning side's legal fees, and possibly arbitration or court costs as well. This changes the economics of a dispute substantially. A business considering whether to pursue or defend a claim needs to understand its potential fee exposure, not just the value of the underlying dispute, to make an informed decision about how aggressively to proceed.
Class Action Waivers and Jury Trial Waivers
Depending on the nature of the business and its contracts, some dispute resolution clauses include a waiver of the right to participate in a class action or a waiver of the right to a jury trial. These waivers are generally enforceable in Michigan and elsewhere when properly drafted, and businesses should understand that signing them forecloses those options entirely, not just in the specific dispute that prompted a closer read of the contract.
A Practical Review Checklist
Before signing any commercial contract, or when reviewing existing contracts as part of a broader risk assessment, the dispute resolution clause deserves the same scrutiny as the payment and liability terms.
Confirm whether the clause requires arbitration, litigation, or a multi-step process, and understand the practical tradeoffs of that choice.
Identify the designated venue and governing law, and whether either favors the other party's home jurisdiction.
Note any written notice requirements, including required delivery methods, addresses, and cure periods.
Check for a prevailing-party fee-shifting provision and factor that into any future decision about pursuing or defending a claim.
Look for class action and jury trial waivers, and understand that these are generally enforceable if properly drafted.
Read It Before You Need It
The dispute resolution clause is often the least-read, most consequential part of a commercial contract. Businesses that review it during negotiation, rather than after a dispute begins, retain the ability to negotiate more favorable terms or walk away from an unfavorable arrangement. Businesses that wait until a conflict arises are stuck reading it for the first time under the terms they already agreed to.
Oxbridge Legal Services PLLC helps Michigan businesses review and negotiate dispute resolution terms before contracts are signed, and helps navigate them when a dispute has already started. If you have a contract to review or a dispute developing under one you have already signed, contact Oxbridge Legal Services PLLC to discuss your options.
