Legal Definitions - resolving clause

A resolving clause is a specific provision within a legal document, such as a contract, will, or trust agreement, designed to address and settle potential ambiguities, conflicts, or unforeseen circumstances that might arise in the future. Its purpose is to provide clarity, establish a mechanism for decision-making, or set a default rule to prevent future disputes or legal challenges, thereby "resolving" potential problems before they escalate.

Here are a few examples to illustrate this concept:

• Example 1: In a Last Will and Testament

  Imagine a will that states: "If any beneficiary named in this Will predeceases me, their share of my estate shall be distributed equally among my surviving named beneficiaries."

  This is a resolving clause because it anticipates a potential future event (a beneficiary dying before the will-maker) and provides a clear rule for how that situation should be handled. Without this clause, there could be uncertainty or a dispute over what happens to that share, potentially requiring court intervention. The clause resolves this potential issue proactively.

• Example 2: In a Business Partnership Agreement

  Consider a partnership agreement between two business owners that includes the following language: "Any dispute or claim arising out of or relating to this Agreement, or the breach thereof, shall first be submitted to non-binding mediation in [City, State] before either party may initiate litigation."

  This clause acts as a resolving clause by establishing a mandatory process (mediation) for addressing future disagreements between the partners. It aims to resolve conflicts efficiently and amicably, preventing immediate recourse to costly and time-consuming lawsuits. It provides a structured method for resolving disputes that might otherwise stall the business or dissolve the partnership.

• Example 3: In a Real Estate Purchase Agreement

  A clause in a home purchase contract might state: "In the event the appraisal value of the property is less than the agreed-upon purchase price, the Buyer shall have the option to renegotiate the price, proceed with the purchase at the original price, or terminate this Agreement without penalty."

  This is a resolving clause because it addresses a common potential issue in real estate transactions – a discrepancy between the agreed price and the appraised value. It provides clear options for the buyer, resolving the uncertainty that would otherwise arise from such a situation and preventing a stalemate or dispute over the contract's validity.