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Dispute resolution clauses in contracts can be seen as the commercial relationship equivalent of the “prenup” – something too awkward to raise. However, instead of being reserved to the domain of the rich and/or famous, dispute resolution clauses are (or at least should be) mainstream, writes Ryan Cable.
I get it, negotiating how disputes will be resolved when you’re riding the high of forming what you’re both sure will be a mutually profitable commercial relationship is an awkward topic to broach. That said, recent cases across Australia demonstrate that what can be more awkward is explaining to investors/shareholders/management that you’re embroiled in a costly and internal resources/time-draining dispute, which is not much more than a side quest about how to resolve the substantive dispute.
The following are some examples which can be kept in mind for those embarking on contract negotiations or for reviewing existing standard terms.
Different processes for different disputes: Potential headaches
Complications can arise from having vague escalation provisions within a dispute resolution clause under which certain types of disputes, typically anticipated to be ‘smaller’, are referred to a particular dispute resolution process (e.g., expert determination) with ‘larger’ disputes, sometimes determined solely based on the amount of a claim, referred to a different dispute resolution process (e.g., litigation or arbitration).
Good and sensible in theory, but in practice, fraught with ambiguity and potential dispute. For example, whether a dispute falls within one or more of the defined categories of dispute, or possibly whether the monetary threshold for one of the resolution pathways has been met, can scuttle what had hoped to be a mechanism for efficiently resolving disputes.
Textbook classic: An ‘agreement to agree’ on a dispute process
In late 2025, the NSW Supreme Court in Iosefa v Polar Air Cargo Worldwide, Inc; Polar Air Cargo Worldwide, In v Dnata Airport Services Pty Ltd [2025] NSWSC 1500 held that the language used in a dispute clause was non-mandatory and, therefore, amounted only to an agreement that the parties (jointly) could agree to resolve disputes via arbitration. The ‘offending’ clause is worth setting out to highlight the avenues for dispute left open in the dispute clause itself:
In the event of any dispute or claim concerning the scope, meaning, construction or effect of this Agreement, the parties shall make all reasonable efforts to resolve disputes among themselves. Failing mutual resolution of the dispute, the parties may elect to resolve the dispute through arbitration (either by a single arbitrator or a panel of arbitrators). In the event that the parties fail to agree to an arbitration process, the dispute shall be settled in accordance with the laws of the state or jurisdiction set out in Annex(es) B, by the courts set out in Annex(es) B without regard to principles of conflict of laws.
Just a day later, in the Queensland Supreme Court, the opposite outcome was reached. In Brisbane Airport Corporation Pty Ltd v Jacobs Group (Australia) Pty Ltd [2025] QSC 349, Brisbane Airport had attempted to say that the inclusion of “may” at the outset of the dispute resolution escalation process meant that the parties “may” decide not to follow the process, which culminated in referring disputes to arbitration. The airport’s argument never got off the ground, with the court determining that the language in the remainder of the clause made clear that the “may” at the start referred to deciding whether to commence the dispute resolution process or not.
Perils of not reviewing precedent contracts
Things change. This includes the names of appointing authorities, which might be named in contracts for the purpose of selecting an expert determiner or arbitrator if the parties cannot reach agreement on the selection. Ordinarily, cooler heads would prevail, and agreement could be reached on who should step in to take the place of a now defunct institution. However, in reality, if the parties are already in dispute, chances of agreeing on anything can be optimistic.
Similar circumstances arose in the 2018 case of Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825 where a multi-day hearing was required to determine how to resolve a dispute about the appointment process of an arbitrator in circumstances where the appointment institution within the contract (in that instance, the “Australasian Dispute Centre”) no longer existed after having folded in 2014. However, the court held there was clearly an arbitration agreement and that the appointment mechanism was the only real hurdle, which could be severed with the appointment of the arbitrator being possible under the relevant legislation.
Fights about fights can be mitigated
For all the right (and obvious) reasons, dispute resolution clauses are rarely one of the key agenda items in contract negotiations. However, paying insufficient attention to the clause can cause delay and substantive costs if things regrettably go sideways down the track.
While it’s not always possible to foresee what disputes may arise under a contract, setting out a clear and unambiguous roadmap for handling any dispute provides certainty with regard to how to efficiently resolve disputes, which can improve the odds of a swift resolution, saving time, costs, and potentially a commercial relationship.
Ryan Cable is a partner at Dentons.
