Week 11 Flashcards
Solution to prevent disputes:
- Limitation of Liability – some or all parties not liable for certain kinds of claims
- Indemnification – Anticipate the amount of damages to be paid, in order to avoid having to go to court:
- liquidated damages clause (the parties agree in advance on the damages to be paid in the event of a breach)
- late payment interests
- Amicable Dispute Resolution with an escalation procedure (ex. in case of failed resolution attempts).
Despite precautions taken, if there is a dispute anyway, what are the options?
- Judicial dispute resolution: ex. in the US, before a state court or federal court depending on the subject matter of the dispute; or
- Alternative dispute resolution (ADR): processes that are possible even if not provided for in the contract.
- One of these dispute resolution clauses should be inserted every time parties enter into a contract.
Conditions to initiate legal proceedings:
- An interest that is:
- Actual (existing)
- Concrete & legitimate
- Direct & personal
- Ability of act - ex. some persons/associations are entitled to act in place of others: liquidator, trade unions etc.
- Legal capacity - individuals, legal entity; exceptions: minors, incapable adults
Statute of Limitations
Laws passed by legislative bodies in common law systems to set the maximum time after an event within which legal proceedings may be initiated.
In civil law systems, similar provisions are typically part of their civil or criminal codes and known collectively as periods of prescription. The cause of action dictates the statute of limitations, which can be reduced (or extended) to ensure a fair trial.The intention of these laws is to facilitate resolution within a “reasonable” length of time.
Constraints: the use of right must not be abusive
Discovery:
the formal, pre-trial process of exchanging information between parties regarding witnesses and evidence they will present at trial; characteristic of the Anglo-Saxon legal tradition.
Pros of discovery:
- equalizer between the parties;
- shortens process by eliminating undisputed points;
- allows for preparation before the trial;
- could result in pre-trial or early settlement as result of seeing the other side’s material;
Cons of discovery:
- Prolongation of pretrial process potentially elongates litigation;
- Commercial impact: strategic and sensitive information (trade secrets, know-how, etc.) may be suddenly in the hands of a company’s competitors. This could endanger the business after litigation;
- Discovery material may be leaked to outside parties;
- Information can be demanded from companies that are not party to the case (ie. third parties), exposing their business practices to the danger of exploitation and leakage.
- Material & human costs: American companies have archiving systems in order to retain the discovery information they might need to produce should they be involved in litigation. This calls into question the privacy rights of the people whose personal data is archived for sometimes indeterminate periods of time.
Class action lawsuit
procedural process that allows a plaintiff to file and prosecute a lawsuit on behalf of an entire class/group. The case is simpler for the courts to manage because all the individuals (potentially large in number and geographically dispersed) who compose the class are not named plaintiffs, but they all share the result of the law suit.
- Members of the class must have all suffered from the same loss because of the defendant.
- First created by English courts, but class actions are the biggest player in the US court system.
- Feared by corporations because of the large pricetag for defense and large settlements or awards, thus corporations may write into contracts that disputes must be individually settled in arbitration.
The disadvantages of judicial dispute resolution
- Excessive length of the procedure: litigation is a very complex process. It needs to go through many steps and stages before the trial starts. It takes a long time to complete these pre-trial stages.
- Complexity of the applicable procedural rules any lawsuit must comply with.
- Technical incompetence of judges: jury and judge’s lack of knowledge in a technical field (ex. biology for a pharmaceutical industry case) might result in wrong decisions and consequential appeals to higher forums.
- Lack of confidentiality: court proceedings are conducted in public. In particular, the press is usually admitted so the case to be reported in the local or national newspapers.
- Presence of a jury in some cases: juror selection is out of the litigant’s hands, though the litigant can ask the judge to replace a jury member before a trial begins based on cause or a peremptory challenge.
- Excessive cost of the procedure: examples of the expenses include: lawyers’ fees, expert witnesses’ fees and other associated fees.
Alternative Dispute Resolution (“ADR”)
refers to any means of settling disputes outside the court system. Because of the increasing number of law suits, rising costs of litigation, and the length of the process, more and more states have begun experimenting ADR programs. Some of these programs are voluntary; others are mandatory.
ADR typically includes:
- Negotiation
- Mediation
- Conciliation
- Dispute boards
- Conventional expertise
- Arbitration
- Multi-tier clauses
- Hybrid mechanism
Negotiation (simplest form of ADR):
- procedure whereby the parties to a legal dispute engage in discussions to try to reach a voluntary settlement of their dispute;
- may take place at any time (before or after a lawsuit is filed, or before other forms of ADR are used);
- if a settlement of a dispute is reached through negotiation, a settlement agreement that contains the terms of the agreement must be drafted and signed by each party to be effective; each party must make concessions; the dispute is definitively settled by the settlement agreement and may no longer be challenged before a court;
- Settlement agreement under articles 2044 and seq. of the French civil Code: it is often used for disputes between employers and employees.
Mediation
Involves a neutral third party who helps the parties to reach a settlement; the mediator is impartial and does not express an opinion on the matter unless all the parties agree to this.
Conciliation
involves a neutral third party who suggests a basis for a settlement; the conciliator may give advice on the subject matter.
Dispute boards
Permanent body usually composed of one or three members which is set up at the signature of a contract or at the beginning of the performance of a mid-term or long-term contract;
Role: to help the parties avoid or overcome any disagreement or dispute that may arise in the course of their contractual relationship; it can encourage the parties to resolve their disagreement on their own and, if this is not possible, it can rule on the disagreement by issuing a recommendation or a decision.
Dispute boards are not arbitral trials; their decisions are not binding.
Advantages
Constant involvement which allows for a reduction of the risks and disruptions of the contract: the members of the board are familiar with the procedures and the actors of the contract and are kept informed of any development of the contract.
Disadvantages
Expensive: generally paid on a monthly lump sum basis; as a result, they are often used for significant contracts (ex: construction contracts or in research and development contracts).
