Fee Dispute Provisions: What’s in your contract?

Confused, young businessman looking at chalk drawn arrows on a cUnderstand the consequence of the fee dispute provision in your contract before being faced with a non-paying customer.

When asked to assist to collect a claim, one of the first questions we ask is about the dispute resolution clause in the client’s underlying contract.

Upon review, creditors are often surprised to learn the process they need to follow to collect their money. Rather than helping you get paid quickly, the clause in the client’s contract hinders their efforts to collect monies owed.

When counsel prepares the standard contract for your business, the dispute resolution clause is drafted in anticipation of claims that may be brought against you by a disgruntled customer or client.

Creditors often find that the dispute provisions set forth a process that is too costly for the size of the balance owed or, is too lengthy which diminishes the chance of collecting.

A clause drafted in anticipation of a need to collect monies owed would contain favorable terms and could include the following:

  1. The venue (place) where the dispute must be heard i.e. the State where the case should be filed which is inconvenient for fee disputes,
  1. The choice of Law i.e. which State’s law must apply,
  1. The process i.e. Litigation, Arbitration or Mediation or a combination of all, and
  1. The tribunal that must hear the case i.e. the Federal Court, State Court, AAA, ICC or another.

Because Dispute Resolution clauses are generally not drafted solely for fee disputes, you must understand the impact it has on your ability to collect monies. If the process or procedure provided in your contract or, lack thereof, is not cost effective or, further delays payment to you make a change.

If you have questions about fee dispute provisions or need help getting paid, contact Frank, Frank Goldstein & Nager by email at jnager@ffgnesqs.com or call 212-686-0100.