A dispute resolution clause states the mechanism by which disputes between parties to a contract will be resolved. It usually requires the parties to participate in a non-litigious process before litigation is commenced or in lieu of litigation. It may also modify the parties’ rights to litigate, for example, by altering limitation periods or imposing compulsory arbitration.
A failure by an innocent party to mitigate its loss following a breach of contract may reduce the amount of damages payable to that party. The law will not require a contract breaker to pay for loss that the innocent party could have avoided by taking reasonable steps.
The ‘reasonable steps’ which are required of an innocent party are generally not particularly onerous (unless the contract provides otherwise). The innocent party should do what it reasonably can to minimise the loss, while acting within the course of its business. It is not required to sacrifice or risk its property or rights in order to mitigate its loss.
For more information, see below or download Gilbert + Tobin’s Guide to Mitigation of Loss Following a Breach of Contract.
Where a dispute is resolved, it is advisable for parties to enter into a settlement deed even if proceedings have not been commenced, for example to make it easier prevent the same dispute being litigated later. However, it is important to note that an oral or informal agreement to settle a dispute may be enforceable even if the parties have not, or have not yet, entered into a settlement deed.
Settlement deeds are also known as deeds of release.
Under the Uniform Evidence Acts, documents and communications will be subject to ‘without prejudice privilege’ and will therefore not be admissible in proceedings if:
- the communication was made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
- the document was prepared in connection with an attempt to negotiate a settlement of a dispute.
A similar without prejudice doctrine applies under the common law, although there may be some differences (e.g. it is arguable that the common law doctrine only applies to communications being relied upon as admissions whereas the “in connection with” requirement in the Evidence Acts may be wider).
The purpose of the privilege is to enable parties engaged in an attempt to compromise litigation to communicate with each other freely and without risk of making admissions that might be used in the litigation.
There are some circumstances in which without prejudice privilege can be waived, however it cannot be waived by only one party.