FAQs - Dispute Prevention Pledge for Business Relationships
Conflict arises in all relationships. Business relationships are no different. The Dispute Prevention Pledge for Business Relationships is intended to encourage companies and organizations to consider embedding in their business arrangements mechanisms that can help the parties to these arrangements identify conflict when it arises and prevent it from hardening into a value-depleting dispute. It is our hope that companies and organizations can point to their adherence to the Pledge as signifying a willingness to explore the use of dispute prevention mechanisms as well as a recognition of the importance of dispute prevention for preserving business relationships and maintaining business purpose.
Companies, law firms, partnerships, not-for-profits are all eligible to sign the Pledge. Any entity that enters into business arrangements can sign the Pledge and endorse a focus on dispute prevention for business relationships.
The pledge provides companies an opportunity to proclaim their recognition of the benefits of dispute prevention, and in so doing, to encourage others to do the same.
Those benefits include:
Maintaining Corporate Purpose - dispute prevention allows the parties to focus on their business objectives rather than on costly and distracting disputes.
Cooperative Working Relationship - dispute prevention provisions in a contract establish a mutual commitment of the parties to work in an honest and constructive manner with each other.
Business Continuity - dispute prevention can reduce or eliminate the costs associated with contractual disputes and the related business disruption when conflicts between parties arise.
Cost-Savings - costs of implementing dispute prevention mechanisms are modest as compared to the costs of the dispute or efforts to resolve the dispute.
The Pledge also makes clear that the willingness to consider dispute prevention mechanisms in business arrangements is not a sign of a lack of confidence in the rightness of the organization’s position, but is a matter of policy. Put another way, the Pledge may be viewed as taking the onus off those who wish to pursue dispute prevention.
The Pledge also promotes discussions within and between companies amongst a variety of stakeholders from lawyers to business leaders that will encourage a focus on the value of the business arrangement and how best to optimize it.
Dispute prevention mechanisms are designed to assist and encourage parties in a business arrangement to identify conflict early and find ways to manage it to avoid the conflict hardening into a value-depleting dispute. These mechanisms can be implemented by parties on their own or together; they can reflect best practices and be captured in contractual provisions; and they can involve the engagement of third parties to facilitate dispute prevention. There is no “one size fits all” mechanism. We would be happy to discuss further the variety of options.
No. There may be business arrangements, which the parties do not deem appropriate for such mechanisms, or the parties may not be able to agree upon the use of such mechanisms. The Pledge contemplates these circumstances.
We are hopeful that signatories to the Pledge will share their endorsement with others, will share best practices for dispute prevention with the business community, and will otherwise act as an ambassador for promoting dispute prevention. We also encourage law firms to counsel clients on dispute prevention, and clients to counsel law firms on the same.
CPR’s earlier pledges focused on dispute resolution. CPR’s Corporate Policy Statement on Alternatives to Litigation and Law Firm Policy Statement committed companies and law firm to consider alternative dispute resolution before filing suit. CPR’s 21st Century Pledge committed companies to a more, systemic approach to dispute resolution that emphasized the development of processes and resources to better institutionalize alternative dispute resolution.
This pledge focuses on dispute prevention. Dispute prevention involves the planning, monitoring and/or intervention necessary to stabilize a business relationship when conflicts emerge. Dispute prevention intervenes before the conflict hardens and escalates into a dispute by finding a solution that maximizes the value of the business relationship.
Dispute prevention precedes dispute resolution in the dispute management continuum. Dispute prevention concentrates on addressing conflicts in business relationships amongst the parties in real time, their objectives and the solutions necessary to meet those objectives; in contrast, dispute resolution focuses on a legal dispute and questions of fault, liability or exposure and how to resolve those questions.