Negotiation before commencing legal prceedings: A seemingly simple clause that may cause an enterprise to lose it procedural advantage
In many commercial contracts, a clause requiring the parties to negotiate before commencing legal proceedings often occupies only a few lines in the dispute resolution section. Many enterprises regard this as a formality, included to demonstrate goodwill and cooperation rather than as an obligation that must be properly implemented and supported by retained evidence. However, when a dispute arises, a seemingly simple clause may significantly affect the strategy for resolving the matter. If negotiation is identified as a step that must be taken before bringing the dispute before a Court or arbitration, failure to comply with this step may enable the other party to raise procedural objections, give rise to arguments unrelated to the substantive issues of the dispute, and prolong the resolution process. The risk does not arise only where an enterprise fails to negotiate altogether. A vaguely drafted clause, an undocumented negotiation process, or an excessively long period spent wai...