Risk Management and Dispute Resolution
What this domain tests
Risk Management and Dispute Resolution tests identifying and allocating risk, and choosing among negotiation, mediation, arbitration, and litigation. Expect contract clauses, arbitrability, and jurisdiction.
Core rules and concepts
- Risk tools: Insurance, indemnification, limitation-of-liability clauses, warranties, force majeure, and due diligence. Enforceability varies: liquidated damages must be reasonable, not penalties; exculpation cannot cover gross negligence.
- Jurisdiction: Personal jurisdiction needs minimum contacts and fairness; subject-matter jurisdiction is federal question or diversity (more than $75,000, complete diversity). Venue and forum-selection clauses are generally enforced.
- Arbitration: The Federal Arbitration Act favors enforcement of written arbitration agreements. Courts decide arbitrability unless the parties clearly delegate; AT&T Mobility v. Concepcion upheld class-action waivers in many contexts. Awards are hard to appeal.
- Mediation: Nonbinding facilitation; settlement agreements are contracts.
- Litigation: Pleadings, discovery, summary judgment, trial. ADR can be faster and confidential but may lack precedential value.
Worked example
A contract has an arbitration clause and a clause delegating "all questions of arbitrability" to the arbitrator. A party sues in court alleging unconscionability. Under the delegation clause, the court sends the arbitrability question to the arbitrator unless the delegation clause itself is invalid. This differs from a bare arbitration clause, where the court presumptively decides arbitrability.
Traps that cost marks
- Assuming arbitration is always cheaper or always final; review is narrow but not nonexistent.
- Missing the difference between mediation (nonbinding) and arbitration (binding).
- Confusing personal jurisdiction with venue.
- Enforcing a penalty clause as liquidated damages.