Tag Archive for dispute resolution

What Happens When You Don’t Have a Written Agreement: [Part 2, Real Life Application]

January 9, 2012 Contracts, Game Development, Litigation, Negotiations No comments

This article is the second part of a two part series. Please refer to Part 1, Contract Basics, if some terms or examples seem unclear.

Now that the contract basics are explained, it’s time to examine real life application of those principles. Ideally you don’t want disputes to go to litigation. Hopefully you’ll be able to negotiate terms that, if not favorable to all, are at least enough to make sure that everyone lets go of the matter before dumping thousands into legal fees. However, much of that negotiation will depend on your leverage under the law and your ability to determine whether the law is on your side. Below we’ll employ some of the contract principles learned before in some fairly typical contract dispute situations and specifically when no formal agreement exists.

Types of Informal Agreements

In most cases when we’re looking at the independent developer space, the contracts you’ll see most often are work-for-hire agreements or collaboration agreements among individuals. These almost always count as service agreements and don’t necessarily require a signed writing to be enforceable. Note that while service contracts that take longer than a year to perform require a signed writing, service contracts for an indefinite term don’t necessarily require the same. So even if you don’t have anything definitive in writing, a contract may still be enforceable if the circumstances suggest a valid agreement.

The Gentleman’s Agreement (Oral or Handshake Agreement) and Enforceability

                Oral contracts and handshake agreements are fairly common in the entertainment industry. They are particularly common in independent game development. They rely on mutual trust and knowledge among the contributors and are frequently the result of prior relationships. It’s often said that an oral contract is “worth the paper it’s written on,” and in some cases that is definitely true. There are certainly a number of draw backs to having an oral agreement over a written one, not the least being enforceability and the likelihood of a shorter statute of limitations.

However, oral contracts are enforceable under many circumstances and shouldn’t be dismissed so easily. The problem with enforcing an oral contract is evidence—if it’s just an agreement between two people the dispute will inevitably break into to a “he said, she said” finger-pointing match unless you have a witness or some other evidence pointing to an actual agreement. Sometimes that evidence can be performance itself; however, unless there’s definitive proof or witness testimony concerning compensation for that performance, a court of law may only apply the market value of the performance instead of what was actually agreed to in order to make the person “whole”. Let’s look at an example:

Example #6: Among Friends: Anne, Bill, and Charlie worked together at a game studio that fell on financial difficulty. The three decide to go off on their own to create their own game and meet at Bill’s house to go over duties and logistics. They decide that Anne will handle art and music assets, Bill will handle design and act as production manager, and Charlie is in charge of programming/tools. They’re each entitled to a third of the income. However, no written agreement is formed. Bill acts as the unofficial leader of the group and also handles license procurement and applications to the requisite online distribution channels like as Steam and Impulse. Nine months later they complete a simple but engaging game and release it on Steam. The game is a hit and Bill starts receiving payments from Steam, which he fails to distribute to Anne and Charlie. Anne and Charlie sue Bill for breach of contract asserting their entitlement to two-thirds of the proceeds. Bill argues that he treated them as independent contractors and they are only entitled to 10% each. Everyone’s testimony is equally convincing, so the court relies on expert testimony and the market value of the contributions performed by Anne and Charlie. The experts disagree as to market value, but it’s clear that the contributions exceed 10% of the finished product. The court awards Anne and Charlie 20% each for their contributions, with the remaining 60% going to Bill.

The example above demonstrates the difficulty in proving the terms of an oral contract—however, this problem becomes less obvious if more people are involved or if disinterested third parties know about the agreement and can act as witnesses against the person breaching the agreement.

The “Living Contract” (E-mail Exchange)

Another often-seen disputed agreement comes in the form of e-mail exchange, which is probably more common than the handshake agreement these days. While e-mail or letter exchanges provide more evidence of an existing contract, they come with their own host of problems concerning enforceability. First, there’s the question of validity—is there a valid offer and acceptance, is there a counter-offer, and has a counter-offer been rejected or accepted? Then there’s the question of whether any particular e-mail constitutes a “written agreement” or “integrated agreement” for purposes of the parol evidence rule. Additionally, there’s the issue of whether later e-mail exchanges act as modifications or amendments to the earlier contract.

Offer, acceptance, revocation, and counter-offer

As mentioned above, mutual agreement requires offer and acceptance. A counter-offer is essentially a rejection of the original offer, so once a counter-offer is made, the original offer is typically treated as invalid unless offered again. An offer can be revoked at any time prior to acceptance. In the case of an e-mail exchange, many offers or counter-offers may be made before there is acceptance—and if the acceptance is based on an earlier offer that has already been revoked or rejected with another counter-offer, there’s an argument that the acceptance isn’t valid. Let’s look at an example.

Example #7: Whose line is it, anyway?: Nick and Alice are in the process of putting together a team for their newest project, “Delilah’s Curse”, a post-apocalyptic RPG where the player is the parent of the harbinger of the apocalypse. The parent is presented with a Hobson’s choice: He or she can either save his or her child or protect the world from complete annihilation. Ultimately the goal is to achieve a balance where both can be saved. Nick, without disclosing the project details, sends an e-mail to his friend Tom, a skilled level designer, and asks if he’d like to get involved with the project. Tom responds with a request for more information. Alice, who is CC’d on all correspondences, replies that the contents of the game concept can’t be disclosed without an NDA, but she strongly believes Tom is an excellent fit for the project. Nick then sends Tom an NDA for negotiation purposes. Tom doesn’t sign the agreement, but responds with the statement “I accept the terms of your NDA. Please tell me more about the project and the compensation you’re offering.” Alice sends Tom a brief synopsis of the game and the work they expect Tom to perform. She offers him $3,000 per milestone deliverable and contingent compensation of 10% of net profit. A few minutes later, Nick sends the same synopsis and offers him $2,500 per milestone deliverable and a contingent compensation of 15%. Confused, Tom accepts Alice’s earlier offer. Nick responds that Nick’s offer was meant to replace Alice’s offer and Alice’s offer is no longer valid. Tom refuses Nick’s offer and insists on Alice’s offer. Alice suggests in her reply that Nick’s offer is more favorable—however, Tom responds that he would still prefer Alice’s offer and rejects Nick’s offer. The next day he sends a follow up e-mail saying he’s thought about it, and he’s willing to consider taking Nick’s offer if the milestone deliverable payments are upped to $2,700. However, unbeknownst to Tom, Alice had sent an e-mail in the middle of the night stating that she’s sorry for his rejection, and they’ll look for someone else. The next day, Nick sees Tom’s counter-offer. He sends Tom a response stating “Let me talk to Alice and get back to you. I think she’ll accept. In the meantime, here is the work order for the first milestone deliverable.” Tom begins work on the first milestone deliverable. Two weeks later, he receives a response from Alice, which states “I’m sorry, but we’ve already found someone else for the position. Please ignore Nick’s prior e-mail.”

Tom, believing that he’s entitled to the contract for $3,000 at 10% contingent compensation, or at the very least $2,700 at 15%, sues Alice and Nick for breach of contract. The case eventually goes to Court, and the Court finds the following: 1) under that jurisdiction’s law, Tom’s acceptance of the NDA in addition to his electronic signature constitutes a valid agreement for purposes of the NDA; 2) Nick’s subsequent offer after Alice’s initial offer constitutes a revocation of Alice’s original offer; 3) Tom’s rejection of Nick’s offer and acceptance of Alice’s original offer was a counter-offer by Tom; 4) Alice’s late night e-mail constituted a valid rejection of the counter-offer by Tom; 5) Tom’s next day e-mail constituted a new offer by Tom; 6) Although Nick’s response to Tom’s offer may have created some expectancy of being hired, nothing in the response constituted an acceptance of Tom’s offer, so no contract was formed; 7) Because nothing in the e-mail sent by Nick actually requested performance on the work order, no request for work was actually made and Tom is not entitled to damages arising from promissory estoppel; and 8) Alice’s final e-mail constituted a rejection of Tom’s offer.

Note that the decisions reached by the Court are only hypothetical—depending on the jurisdiction and the language used in any given e-mail, Nick may have created a reasonable expectation in Tom that Tom’s offer would be accepted. In that case Tom’s performance may have entitled him to promissory estoppel. There is also the question of authority between Nick and Alice—if Alice is the person responsible for the project and Nick is only acting as her agent, a whole other slew of issues concerning agency law arise. The main point here is that the “living agreement” can get convoluted and it isn’t always clear whether a contract has actually been formed or not.

Parol Evidence Rule and the Hybrid Oral Contract/Living Agreement

A “Living Agreement” can be even more convoluted if you throw in oral correspondences in addition to e-mail exchanges. For example, if Tom had accepted Nick’s second offer of $2,500 and contingent compensation of 15%, and then later sent his e-mail accepting Alice’s first offer, the question of acceptance versus counter-offer would become even more complicated. For this situation most jurisdictions have imposed the “Parol Evidence Rule”, but even that rule may not be applicable in all circumstances. Simply stated, the Parol Evidence Rule prohibits things outside of an existing contract, such as oral or written communications (this extrinsic evidence is called “parol evidence”), from being admitted as evidence when a final or “integrated” contract exists if that evidence contradicts or adds to the written terms. This is limited to prior or contemporaneous evidence, like oral communications or e-mail exchanges made prior to or at the same time as the execution of the final written agreement.

The most obvious question for our purposes is whether an “integrated” agreement actually exists. A contract is integrated if it is a final written agreement between the parties. In other words, all of the necessary terms are set out in the agreement, and as an additional security the parties may include a merger clause that asserts that the agreement is the final agreement between the parties. The more common problem when no formal contract exists is that an agreement may only be partially integrated—in that case, only some terms are clearly agreed to between the parties while others are left in dispute or not discussed at all. In that case, some parol evidence may be admissible if it expounds on those undefined terms.

When we’re looking at an e-mail exchange, it’s possible that a partially or fully integrated agreement could come into existence through one or more of the correspondences. Let’s return to our earlier example concerning Delilah’s Curse:

Example #8: Let’s assume that Tom has decided to accept Nick’s offer of $2,500 per milestone deliverable with 15% contingent compensation. Prior to responding to Nick’s offer via e-mail, Tom calls Alice and Nick to further discuss his role in the project, when payments will be made, and when milestones are due. However, in his next correspondence he states nothing more than “As per our conversation, I’d like to accept the level design position for $2,500 p/MSD and 15% contingent compensation on release.” During the phone discussion, Nick and Alice agreed that milestone delivery payments would be paid within 10 days of delivery regardless of whether or not the milestone was approved. However, the work order forms (none of which are signed by the parties) states that payment will only be made if the deliverable is approved by Nick and Alice. A few months down the road, Tom submits a milestone deliverable. Nick and Alice fail to make payment within 10 days. Tom contacts Nick and Alice about the payment and they respond that they had some problems with the milestone that need to be fixed before they’re willing to make an agreement. Tom argues that they’d agreed to make the payment regardless of approval. However, Nick and Alice point to the provision in the work order requiring approval before payment. Angered, Tom refuses to do any more work on the project and sues Nick and Alice for breach. Nick and Alice file a counter-complaint asserting breach of contract against Tom.

The suit goes to trial and the Court decides the following: 1) A partially integrated agreement existed with regard to Tom’s position and compensation; 2) the work orders are integrated into the agreement based on Tom’s past performance of those work orders and failure to dispute the terms of the work orders; 3) the oral agreement made prior to Tom’s formal acceptance is barred by the parol evidence rule since it was made prior to the partially integrated agreement and directly conflicts with the term of the work order; 4) Tom is in breach for refusing to perform; 5) neither Nick or Alice are in breach, but are expected to exercise good faith when determining whether a milestone is “approved”.

The parol evidence rule could go many different ways depending on the circumstances; for instance, if the work order didn’t say anything about payment depending on approval, Tom’s testimony regarding their prior conversation may be admissible as clarifying a key point to the agreement. Also, the work order itself may be treated as parol evidence instead of being treated as an integrated part of the agreement if Tom disputed the payment terms prior to delivering the first milestone (in the contract world, “performance” is frequently treated as “acceptance”). All sorts of contingencies can change the game in a contract dispute—a formal written agreement that clearly defines the agreed upon terms is the easiest way to minimize those contingencies.

Conclusion

The most obvious lesson to take away from this is to always, always get something in writing; but more importantly you need to make sure you understand what’s written down. As stated in Part 1, you don’t need a massive legal document with a bunch of legalese and recitals to formalize your agreement. A document written in plain English with your agreement spelled out in plain and simple terms while taking into consideration as many contingencies as possible is vastly more valuable, legally speaking, than a form agreement that neither party understands. Knowing what to put in that agreement is equally important—for example, if the agreement doesn’t address intellectual property issues, confidentiality, or indemnification matters properly, you’re not covering your bases and you may end up in a conflict down the road. Although living contracts and handshake agreements are enforceable in many cases, they will rarely if ever provide you with the kind of protection you’ll want or need regardless of the outcome of your project.

 

IP Enforcement for Independent Game Developers

December 4, 2009 Contracts, Intellectual Property, Litigation One comment

This issue has a lot of angles and typically two or more sides to each story. On the one hand you have the enforcer, or anyone who owns original IP. An example of the stereotypical enforcer includes Microsoft, who put a complete stop to the independent development of a Command and Conquer “HaloGen” mod that employed Halo’s intellectual property, developed by a small studio called Slipstream. MS subsequently went on to have Ensemble develop Halo Wars, which is, you guessed it, a Halo RTS. Another philosophically controversial “enforcer” example is Apple, who has worked continuously to enforce its EULA against the owners of jailbroken iPhones.

At the other side of this debate is the alleged infringer, which could be an indie like Slipstream or, more problematically, the crackers and black hats who hack DRM and pirate games in a manner that damages the entire industry. This is, in fact, one of the biggest problems arising from jailbroken iPhones; it has rapidly become a problem that creates constant strain in the application and casual game markets.

Regardless of your personal philosophy concerning the identity of the enforcer or the infringer, IP enforcement is an important aspect of protecting what you create. It’s as important in commercial works as it is in open source projects even though the ideals behind enforcement may differ. The issue here is control and access, and who has that control and access. Without this article will explain intellectual property enforcement methodology without touching on personal philosophy or the identity of the infringer or enforcer. It is my belief that it is just as important for independent developers to protect their IP as it is for the majors, and as such the tools for enforcement should be available to all.

Getting it in Writing

Contracts such as EULAs, licenses, and employment agreements are the first line of defense in IP enforcement. The more clearly your contracts set out your intellectual property rights and your remedies in the event of infringement or breach, the more likely the people you contract with are to comply. This is particularly true with regard to proprietary technology, trade secrets, and ideas you want to keep confidential.

Identifying Intellectual Property. The first step in protecting your IP is identifying what you consider protected under the shield of the contract. In the case of employment agreements and NDAs you need to be as specific as possible with regard to trade secrets and proprietary technology. With regard to EULAs you need to identify all components of what you want to protect, including content you’ve licensed from third parties. One example of how this can be done* is demonstrated in the World of Warcraft EULA, which identifies IP in two places: it sets out the game, patches, and manuals in the introduction, and expounds on those basics in the “Ownership” section further down.

Identifying Permissible Use of Intellectual Property. The next step in protecting your IP via contract is clearly stating what the licensor/end user/employee CAN do. Explain what is permissible: in the case of your game’s EULA, explain what users can do with your software; in the case of your employee agreements, explain how and when employees may access or use information; in the case of non-disclosures and confidentiality agreements, explain who information may be disclosed to or when confidentiality may be waived.

Identifying Impermissible/Infringing Use of Intellectual Property. Once you’ve explained what people CAN do with your IP, you need to explain what they can’t do. For example, in the case of games, computer programs, and hardware, one major issue of contention is reverse engineering. Under the Copyright Act reverse engineering is generally (but be careful, because this is a devilishly tricky area of the law) permissible if it is done exclusively for the purpose of interoperability. However, you may not want your game or software to work on jailbroken iPhones or other gaming devices that you plan on porting to down the road. This is something that may arguably (although this is by no means settled law) be limited by the EULA. Most major content owners seem to think so. If it’s something you deem necessary to protect your future interests, you should consider including it.

Identify Remedies and Damages. This is where you let the people you’re contracting with know what they risk if they infringe or impermissibly use your IP. You should include all available equitable remedies (remedies not grounded in monetary damages), including injunctions and restraining orders, as well as statutory and actual damages or profits resulting from infringement.

DRM and Keeping Secrets. If you’re using DRM technology, you need to let people know that you’re using it. You also need to explain that the disruption or removal of that DRM will expose them to additional Copyright Act liability if they choose to crack it. In the case of employment agreements, if you’re trying to protect trade secrets you must take steps to keep information secret. This includes DRM, password protection, encryption, and making it clear to employees that disclosing that information to anyone outside of their department is a big No No.

Cracking Skulls

There’s always a possibility that someone will breach your contractual provisions, or your game will be cracked and pirated, or you’ll find an inferior clone that passes itself off as the original. You will be angry and you will want to do everything you can to stop this from happening. First, calm down. Immediately calling a lawyer and filing a complaint or otherwise throwing a fit is expensive and probably bad for your health and peace of mind. Next, evaluate the validity of your claim. Do you have a claim? Is it really infringement? Would you know if it weren’t? For example, if the product is similar or identical to your own but released prior to or very shortly after your own, there’s a strong presumption of independent creation (which isn’t infringement under Copyright Law). You may want to talk to an attorney before going further. Take a deep breath and review the suggestions below, from most cost efficient to least. In some cases you may want to skip the first option, but as you’re an independent developer you may garner more sympathy from other small collectives, pirates, or studios who are (perhaps unwittingly) infringing on your rights.

Contact the people directly. A polite phone call or casual e-mail as a first step can go a long way in preventing future ill will or the need to lawyer up. If the infringer isn’t aware that the material is infringing or if they don’t understand the basics of IP law, they may comply with a friendly request without any further cost to you. This isn’t always the case, but as I said above, you’re an indie. There’s camaraderie among your fellow compatriots and there’s nothing wrong with taking advantage of that good will to protect your IP.

Send a Cease & Desist. If the first approach is unrealistic or ineffective the next option is a more formal C&D. This should typically come from a lawyer, but if you’re still trying to avoid the need to lawyer up you will want to at least include the following:

  • An introduction that sets out your name, your product, and where your product can be found;
  • A description of the rights you hold in the work, including any music, artwork, engines or code you’ve exclusively licensed;
  • A description of their work, and how it is infringing;
  • A citation of the laws being infringed, including Copyright law, Copyright Circumvention laws, trademark and unfair competition;
  • A list of actions that they must cease and desist;
  • A request for damages, if relevant;
  • A “respond to by” date;
  • Your preferred contact method.

Before you go any further. Have you registered your work/trademark? Under U.S. law you can’t bring an action for copyright infringement against anyone until you’ve filed your application, paid your fee and submitted your deposit. In the case of trademark, monetary damages including profits aren’t available unless your mark is registered and you’ve included the ® symbol or some other notice of registration. The sooner you register the better. Under Copyright law you’re entitled to statutory damages so long as the infringement occurred after you’ve fully completed your application and submitted your fee/deposit, or within three months of the infringement. Since the minimum statutory award is $750 for each infringement registration really shouldn’t be put off. In fact you should make it a policy to register as soon as you complete a project and have something to submit to the copyright office.

Send Takedown Notices. Send takedown notices wherever you find your infringed work. Bear in mind that the DMCA safe harbor only applies to those sites with a registered DMCA agent. If the site or service provider doesn’t have an agent you may want to instead send another C&D explaining why they are also infringers.

File a Complaint. This is certainly the point of no return. If you haven’t lawyered up yet, do so now. If your C&Ds have gone ignored or the infringer has sent a put back up notice in response to your take down, the only way to get that infringing material taken down again is to file a complaint and send a copy of that complaint with a second take down notice. Most websites with DMCA provisions will explain that process in their EULA. You will likely be filing your complaint in federal court and you will want to include every possible cause of action available, including all possible state claims.

At this point the conflict could take a few turns. If this catches the infringer’s attention, you can try to achieve settlement quickly or use some of the mediation or arbitration techniques described previously. It’s typically at this point that enforcement gets pricy and time consuming, but it may be a necessary step to protect your rights.

*  Direct copying from any document including EULAs and other contracts without permission from the original drafter or document owner is typically considered copyright infringement. Draft your own or hire an attorney to draft it for you.

The Benefits of Alternative Dispute Resolution

October 22, 2009 Contracts, Litigation No comments

Contracts offer a lot of flexibility when it comes to resolving disputes and disagreements. This is a major benefit to having a contract in the first place—at the outset of an agreement you can limit the costs and burdens of any potential dispute by the simple expedient of forethought. In any union or deal disputes are going to happen. Alternative Dispute Resolution (ADR) allows you to handle these disputes without destroying your business relationships or emptying your wallet. It is therefore to your benefit to make sure ADR is a part of your agreement.

In the U.S. most ADR is regulated by the American Arbitration Association (AAA). This organization sets the guidelines and procedures that parties should follow when attempting to resolve a dispute through ADR. They also offer access to trained mediators and arbitrators who have experience with dispute resolution. There are different kinds of dispute resolution. The three most common are unofficial negotiations, mediation, and arbitration. Occasionally the media will use terms interchangeably. However, it is important to understand that each of these methods is distinct and unique. Below is an explanation of each and how they're used in the dispute resolution process.

Informal Negotiations

Informal negotiations are self-explanatory—the parties agree to negotiate a settlement informally and between themselves. There are no set guidelines or procedures. When the parties agree to first enter informal negotiations to settle a dispute they are basically agreeing to "talk it out." The parties or the parties' representatives will communicate their concerns about a potential dispute or breach and will attempt to reach a compromise. During this process a lot of information and admissions or denials of wrongdoing may come out, so it is important that both parties understand the need for confidentiality (a matter discussed at length here). Every letter or e-mail should contain a statement about confidentiality and both parties should make an effort to respect that confidentiality.

More importantly unofficial negotiations should be made in good faith. For unofficial negotiations to achieve anything the parties need to genuinely want to resolve the dispute professionally and responsibly, if not amicably. If the parties enter unofficial negotiations with the intent of overwhelming or attacking one another very little is going to be accomplished through this method; if anything it will cause more ill-will and harm than good.

Mediation

If informal negotiations have reached a stalemate mediation may be appropriate. Generally when parties enter mediation they want to resolve the dispute in a manner that permits them to continue working together. The dispute usually hasn't become totally adversarial and the stalemate is a result of an inability to find a fair compromise. If you submit to mediation through the AAA you will be assigned a neutral mediator (usually selected by the parties) who will work with you and the other party to find a fair compromise. However, unlike arbitration or litigation the mediator has no authority to bind the parties to any settlement. In mediation the decision to settle still rests with you. The mediator provides a neutral perspective and usually has experience in resolving similar disputes, so they know what may work best for both parties.

There is some process, preparation and procedure in mediation:

    1) the parties must first mutually agree to submit the dispute to mediation with the AAA;
    2) mediation is initiated when any party to the dispute makes a request for mediation with the AAA. Whoever makes the request is required to notify all other parties to the dispute. Furthermore, parties may have legal representation if they so choose;
    3) The mediation selection process can be somewhat involved. The parties can go online and review the available mediator list, which includes mediator profiles. Hopefully, both parties will agree to the same mediator. If they can't agree each party eliminates unacceptable candidates from the list, then each submits a list of the mediators they would accept in order of preference. Based on the lists of acceptable mediators the AAA will attempt to find a match acceptable to both parties, and the mediator will be invited to assist in the dispute;
    4) The mediator performs a conflicts check to make sure he/she can meet the requirement of neutrality. It should be noted that if the mediator is an attorney, he or she also has a duty to disclose that they are not representing either party in the dispute as counsel;
    5) The mediator then meets at a prearranged time with the parties to reach a settlement. If a settlement is reached, the parties sign a settlement agreement. If the parties are unable to resolve the dispute they move on to the next phase of dispute resolution.

As with informal negotiation it is important to mediate in good faith. It is also important to be respectful to the mediator and the other party despite opposing viewpoints. Maintaining civility is the purpose of ADR—you waste the mediator's and the other party's time when you use mediation sessions as an opportunity to blame, berate or argue.

Binding Arbitration

Binding arbitration is the last resort before litigation, and is most often used as an alternative to litigation. Binding arbitration may be used at the point where the dispute has become adversarial and can no longer be resolved amicably, although that is by no means always the case. In arbitration the parties submit the dispute to one or more (usually up to three) impartial arbiters who resolve the dispute by rendering a final binding judgment (referred to as the Award) that binds both parties. While this sounds a bit like litigation it differs in many ways. The proceedings are more informal and the discovery and admissible evidence rules are substantially more lax. Motion practice is usually ignored. Most importantly, the parties can customize their own rules and procedures for the arbitration. This includes the method of choosing the arbiter, so it's important to think this through when drafting your agreements. Fortunately, although an award granted through binding arbitration is enforceable in court, arbitration is by no means as painful or tedious as the litigation process.

Arbitration does follow some rules. For instance, one party cannot force the other party to arbitrate without a prior agreement. The disputed contract must contain an arbitration clause that refers to the specific AAA rules, and it must state that the parties agree that the award will be enforceable in any competent jurisdiction. Furthermore, you have to follow the appropriate guidelines for your dispute—not all AAA guidelines are the same, and the AAA has different guidelines for different kinds of disputes. If the dispute is commercial, you need to follow the commercial guidelines.

While by and large informal, arbitration procedure is more formal than mediation. The parties must attend both a preliminary hearing and a final hearing. Arbiters may require that necessary documents and evidence be submitted to the arbiter and to one another. It is usually recommended that the parties seek representation, and once again arbiters are bound by conditions of neutrality and no conflicts of interest may exist. If the arbiters are attorneys or judges they must disclose that they are legal professionals but do not represent any party in the dispute.

Alternative Dispute Resolution is a useful practice and one that many businesses swear by. It also demonstrates that litigation is almost always avoidable if the parties are willing enough—and you should always be willing enough.

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