Originally from Alternatives to the High Cost of Litigation

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Contracts can be similar to buying a new pair of shoes–they are often great at first, but over time they either become as comfortable to walk in as a slipper … or cause friction that can turn into a blister.

Left unchecked, friction or misaligned interests can turn into a full-blown dispute or, worse, end up in court. While most conflicts avoid litigation, the time and cost associated with traditional lawyer-led negotiation, mediation, and arbitration can be protracted and expensive. Kate Vitasek, “The Business Case for Dispute Prevention,” 42 Alternatives 157 (November 2024).

Even if the issue does not go to a formal dispute, the friction can cause lost opportunity, value leakage, and transaction costs, which is what Nobel laureate Oliver Williamson called Transaction Cost Economics.