Terms and Conditions Dispute Resolution Clause

What a good one includes

• A mandatory informal negotiation period that requires both parties to attempt to resolve the issue in good faith before initiating formal proceedings.
• A clear small claims court carve-out that allows either party to seek redress for minor disputes without triggering expensive arbitration.
• A robust, conspicuous class action waiver that prevents users from joining collective or representative lawsuits against your business.
• A precise governing law and venue selection clause that dictates exactly which state or regional laws apply and where hearings must take place.
• A defined mediation framework specifying the neutral administration body, such as the AAA or JAMS, and how the associated costs will be shared.
• Severability language ensuring that if one part of the dispute resolution clause is found unenforceable, the remaining provisions still stand.

Common mistakes to avoid

• Drafting rules that are so aggressively one-sided that a court deems the entire arbitration agreement unconscionable and throws it out.
• Omitting a specific carve-out for intellectual property theft or injunctive relief, which accidentally delays your ability to stop immediate harm.
• Failing to make class action waivers conspicuous using bold or capitalized text, leading to judges ruling that users did not receive fair notice.
• Setting unrealistic, overly burdensome pre-dispute negotiation timelines that frustrate users and invite regulatory scrutiny.

Frequently asked questions