The collaborative environment of a business partnership sometimes leads to disagreements and conflicts. While you may not have entered the partnership anticipating those disputes, your partnership agreement should address the potential.
There are several key elements every partnership agreement needs for effective dispute resolution.
Identify potential areas of conflict
The dispute resolution section of your partnership agreement should start with a general outline of potential sources of conflict. Make it clear that this list is not all-inclusive, but use it as a starting point to clarify the types of challenges governed by the agreement.
Establish a tiered process
Tiered dispute resolution offers avenues for amicable resolution before more formal processes become necessary. Include stages for direct negotiation and mediation initially to attempt a resolution without further intervention. If those steps fail, include steps such as arbitration or litigation for resolution. This structured approach allows you to resolve many issues in a manner that preserves your relationship.
Define a timeline
One challenge of many partnership disputes is that they can drag on over time and damage the business. Establish a timeframe for each stage of the resolution process so that you can settle conflicts right away.
Appoint your mediator or arbitrator
When possible, identify your required mediator or arbitrator in the contract. Name a neutral third party with nothing to gain from the process. By appointing someone as part of your partnership agreement, you reduce the risk of complications from trying to agree on someone in the midst of a conflict.
Address confidentiality
Few things damage a company as quickly as airing the details of conflicts publicly. Include a confidentiality clause in your dispute resolution section to protect business information, your reputation and the integrity of the brand.
According to the Chamber of Commerce, 595,000 small businesses fail in the United States each year, including partnerships. Reduce your risk of becoming a statistic by providing your partnership with its best chance of success. A comprehensive dispute resolution process will help you do just that.
