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on ADR ...
uh-oh ... my response pattern is becoming too predictable! 
first of all, I agree, I don't like taking litigation completely off the table, and, as I said, depending on the client/history you may want to remain silent on the issue; the hard reality is that some clients can be quickly intimidated into compliance (typically payment) with a lawsuit; as soon as they're served with process, they either pay up or get down to serious negotiations. So you want that as an option in some cases. Of course with other clients, being sued is no big deal and they will not be intimidated and might well file counterclaims.
Although it really has little or no legal effect, I like to put in a clause to "first negotiate informally in good faith to resolve any dispute" .... it's a matter of staging, setting expectations ... if there's a problem you can call attention to the clause and it might be enough to get to the table.
Normally, mediation is a less formal process in which a (hopefully) skilled and unbiased third party can help the parties sort out grievances and reach some kind of accommodation; typically, they like to facilitate a "win-win" so if someone owes you $8,000, chances are they have some reason for claiming to owe you less than that and you'll probably be encouraged to back off some ... more or less in the interest of everyone "getting something." Of course there are other accommodations which can be made, like you get your $8K but agree to a longer warranty period, or agree to make some code changes, etc. As you can see, it's helpful to have a mediator who knows something about software development so that they have some feel for the concerns of the parties as well as the range of possibilities available to work with. When mediation fails, you can still litigate.
Consultants concerned with these issues should probably do a little shopping around for mediators BEFORE they have a problem so you they can get a better feel for how the mediator works and what the fees are. Needless to say, the parties have to agree on a mediator but if you do some shopping you're in a position to nominate a few people acceptable to you.
Arbitration is a somewhat different process and basically entails presentation of a case by each party to the panel; after hearing the cases, they will issue findings and a decision, which can be binding or non-binding. I don't see too much point in non-binding arb; mediate instead. Binding arb is a little risky in my view; it's cheaper than litigation in many cases but unless you're very familiar with the process it can be a mine-field.
For the small/one-man shop, your best bet is to avoid all of this, contract intelligently only on gigs you know you can do, and keep clients on a short leash so you always have the option of walking away, doing nothing at all and not losing a lot of money. Avoid situations like having an SMB client owing you money in an amount that you NEED.
Anyway, those are a few thoughts on the issues ... everyone should keep in mind that serious disputes requiring any kind of formal dispute resolution process are relatively rare.
If you address these contingencies in your contracts, also keep in mind that if they are overly detailed and prominent, they might raise a red flag for the client.
first of all, I agree, I don't like taking litigation completely off the table, and, as I said, depending on the client/history you may want to remain silent on the issue; the hard reality is that some clients can be quickly intimidated into compliance (typically payment) with a lawsuit; as soon as they're served with process, they either pay up or get down to serious negotiations. So you want that as an option in some cases. Of course with other clients, being sued is no big deal and they will not be intimidated and might well file counterclaims.
Although it really has little or no legal effect, I like to put in a clause to "first negotiate informally in good faith to resolve any dispute" .... it's a matter of staging, setting expectations ... if there's a problem you can call attention to the clause and it might be enough to get to the table.
Normally, mediation is a less formal process in which a (hopefully) skilled and unbiased third party can help the parties sort out grievances and reach some kind of accommodation; typically, they like to facilitate a "win-win" so if someone owes you $8,000, chances are they have some reason for claiming to owe you less than that and you'll probably be encouraged to back off some ... more or less in the interest of everyone "getting something." Of course there are other accommodations which can be made, like you get your $8K but agree to a longer warranty period, or agree to make some code changes, etc. As you can see, it's helpful to have a mediator who knows something about software development so that they have some feel for the concerns of the parties as well as the range of possibilities available to work with. When mediation fails, you can still litigate.
Consultants concerned with these issues should probably do a little shopping around for mediators BEFORE they have a problem so you they can get a better feel for how the mediator works and what the fees are. Needless to say, the parties have to agree on a mediator but if you do some shopping you're in a position to nominate a few people acceptable to you.
Arbitration is a somewhat different process and basically entails presentation of a case by each party to the panel; after hearing the cases, they will issue findings and a decision, which can be binding or non-binding. I don't see too much point in non-binding arb; mediate instead. Binding arb is a little risky in my view; it's cheaper than litigation in many cases but unless you're very familiar with the process it can be a mine-field.
For the small/one-man shop, your best bet is to avoid all of this, contract intelligently only on gigs you know you can do, and keep clients on a short leash so you always have the option of walking away, doing nothing at all and not losing a lot of money. Avoid situations like having an SMB client owing you money in an amount that you NEED.
Anyway, those are a few thoughts on the issues ... everyone should keep in mind that serious disputes requiring any kind of formal dispute resolution process are relatively rare.
If you address these contingencies in your contracts, also keep in mind that if they are overly detailed and prominent, they might raise a red flag for the client.
Posted by herlizness@...
3rd Nov 2008
