Don't get me wrong, I think informal dispute resolution is a great thing!  In fact, in many of my contract templates, I
include language that is similar to the following.  Basically, the language that follows requires the two parties to try and work things out before one of them trots off to court.

Claims; Disputes; Informal Resolution.  In the event of any material dispute or disagreement between the parties with respect to the interpretation of any provision of this Agreement, or with respect to the performance of either party hereunder, each party shall appoint director-level staff (each, a “Representative”) who shall meet in good faith for the purpose of resolving the dispute or disagreement.  The Representatives shall meet as often as the parties reasonably deem necessary in order to gather and furnish to each other all essential, non-privileged information that the parties believe germane to resolution of the matter at issue.  During the course of these non-judicial dispute resolution procedures, documents used to resolve the dispute or disagreement shall be limited to essential, non-privileged information.  All requests shall be made in good faith and be reasonable in light of the economics and time efficiencies intended by the dispute resolution procedures.  Where the Representatives cannot come to resolution of the matter at issue within thirty (30) calendar days following the event resulting in the dispute or disagreement, the remedy provided for herein, if any, associated with such dispute, shall be enforced.  Supplier acknowledges that the timely and complete performance of its obligations pursuant to this Agreement is critical to the business and operations of Customer.  Accordingly, in the event of a dispute or disagreement between Supplier and Customer, Supplier shall continue to perform its obligations hereunder in good faith during the resolution of such dispute or disagreement unless and until this Agreement is terminated in accordance with the provisions hereof.

Good stuff, right?  This language is very common and can be easily copied and pasted into your contract from a variety of Internet resources.  In fact, when suppliers try to push their contract template on me (which the vendor is chagrined to find is usually without success), I often see this type of provision in one form or another.

My pet peeve about informal dispute resolution—and what I see as a common thread in this type of provision—is what I believe is a monumental error.  I can quickly illuminate this monumental error by asking the simple question of, "What happens if confidential information is revealed under the agreement?"

That question usually brings the monumental error crashing around the shoulders of those that draft these types of provisions.

In other words, there are certain duties and obligations under an agreement that, when breached, make an informal dispute resolution process the last thing a party wants to have to go through to assert its rights.  To further my simple question from above, if a supplier breaches its obligation of confidentiality, you'll want to shut that down pretty quick with an injunction, right?  So, whenever I include an informal dispute resolution provision in my contract, I ALWAYS include a carve-out.  Here's the provision I included above, but with the oh-so-important carve-out added and underlined for emphasis.

Claims; Disputes; Informal Resolution.  In the event of any material dispute or disagreement between the parties with respect to the interpretation of any provision of this Agreement, or with respect to the performance of either party hereunder, each party shall appoint director-level staff (each, a “Representative”) who shall meet in good faith for the purpose of resolving the dispute or disagreement.  The Representatives shall meet as often as the parties reasonably deem necessary in order to gather and furnish to each other all essential, non-privileged information that the parties believe germane to resolution of the matter at issue.  During the course of these non-judicial dispute resolution procedures, documents used to resolve the dispute or disagreement shall be limited to essential, non-privileged information.  All requests shall be made in good faith and be reasonable in light of the economics and time efficiencies intended by the dispute resolution procedures.  Where the Representatives cannot come to resolution of the matter at issue within thirty (30) calendar days following the event resulting in the dispute or disagreement, the remedy provided for herein, if any, associated with such dispute, shall be enforced.  A dispute pertaining to a party’s obligations of indemnification and confidentiality shall not be subject to this Section nor shall the provisions of this Section preclude either party from obtaining temporary injunctive relief in order to preserve its rights hereunder.  Supplier acknowledges that the timely and complete performance of its obligations pursuant to this Agreement is critical to the business and operations of Customer.  Accordingly, in the event of a dispute or disagreement between Supplier and Customer, Supplier shall continue to perform its obligations hereunder in good faith during the resolution of such dispute or disagreement unless and until this Agreement is terminated in accordance with the provisions hereof.