Expert Determination is
a low-cost alternative to litigation and arbitration. Simply, an expert determines the facts. The result is a more just outcome with less waste.
Expert Determination is Lower Cost
With Expert Determination, You Save Yourself...
...from Being Cheated of what you are owed
RISK: Clients and other contract counterparties might not uphold their end of the bargain. If clients do not pay their entire fee, they know you lack the time and energy to take them to court or arbitration, so there is little you can do.
HOW AVOIDED: Expert determination requires very little time and energy on your part. It is conducted remotely, without meetings, and is paid for by the losing party. Therefore, if someone refuses to give you what they owe, you can suggest initiating the expert determination process. At that point, they will likely fulfill their contractual obligations rather than pay for an expert to compel them to do so. If not, the expert determination process will be quick, they will pay for it, and it will legally compel them to fulfill their obligation.
...from Frivolous Lawsuits and arbitrations
RISK: Threats of somewhat-frivolous lawsuits can be successful because they can coerce the would-be defendant into an unfairly high settlement. Why? The would-be defendant wants to avoid a long and costly legal battle. Also, since your insurance company will likely manage settlement negotiations, they may settle because they don't want to force you to go through months of hearings, discovery, and court appearances, possibly ending with a humiliating public judgement against you. They don't want you to grow disgusted and find another insurance company. Unfortunately, insurance premiums can rise dramatically as a result of an insurance claim for paying a high settlement. On top of that, insurance may not cover all (or any) of the settlement's cost.
HOW AVOIDED: If expert determination is the required dispute resolution mechanism, then the dispute resolution process is private, has a short fixed duration, has a low capped cost, and is paid for by the losing party. Therefore, a person who receives a somewhat-frivolous threat should proceed with the expert determination process. At that point, the dispute will likely end because either (a) the person making the threat will not want to pay for the dispute resolution process if they lose or (b) a reasonable settlement will be reached.
...from Rising Insurance Premiums after your insurance company pays your settlement
HOW AVOIDED: As discussed above, expert determination allows you to avoid being coerced into paying an unfairly high settlement. When an insurance company pays claims to cover high settlement payouts, premiums skyrocket. Since expert determination avoids these costly insurance claims, it avoids skyrocketing premiums.
...from Distraction and Stress of litigation and arbitration
RISK: Litigation and arbitration can involve months of hearings, discovery, and court appearances for you personally.
HOW AVOIDED: The parties of a contract will be prevented from initiating arbitration or litigation over any dispute related to a factual matter that was agreed to be decided by expert determination. If they attempt to initiate litigation, the proceeding will be stayed (halted). If they attempt to initiate arbitration, upon seeing the contract, the arbitrator will take no further action.
...from Reputational Ruin from public lawsuit judgements
HOW AVOIDED: The results of the expert determination process are private and confidential. Also, the expert will not know the parties’ identities.
...from Inability to Settle before trial or arbitration
RISK: Imagine negotiating the price of a used car without knowing key information such as its mileage. You would have an "inability to settle" on a price. Settlement negotiations suffer from the same problem. According to an article published by the American Bar Association, prior to the beginning of a lawsuit, when the parties are negotiating a settlement, "the party that obtains relevant information without the other side having it gains leverage in negotiation." Parties will not disclose information that hurts their position. As a result, without mandated expert determination, the parties' only opportunity to avoid costly litigation/arbitration is potentially hindered by both parties lacking information that would tell them the likelihood of a judgement against the defendant and the value of that judgement. Without that key information, the disputing parties may go to trial because they are unable to agree on a settlement that makes mutual economic sense given the information they each possess. Worse, they may be tricked into an unfair settlement that is incongruent with the facts.
HOW AVOIDED: With Smarter Contract's expert determination process, before the expert gets involved, both parties must choose between (a) disclosing an already-determined list of documentation to the other party and (b) automatically forfeiting the dispute. As a result, before settlement negotiations, both parties will choose option (a). Therefore, they will negotiate a settlement with a greater likelihood of success, because both parties will know the "used car's mileage." They will have better knowledge of the result expected from proceeding with the dispute, which will help them avoid it by negotiating a settlement.
...from Attorney Fees for resolving disputes
HOW AVOIDED: Insurance may not cover any or all attorney fees in a dispute. Fortunately, the Expert Determination process, unlike litigation and arbitration, does not require the involvement of attorneys. Why? When a contract requires expert determination for a dispute, it limits the scope of the the dispute resolution process to the resolution of a factual matter. The parties to the contract therefore only need to discuss matters of fact (i.e. what happened) with the expert. An attorney will be of little assistance because an attorney does not know what happened. Once the factual matter is resolved, the contract will clearly mandate what must happen next. An attorney is therefore never required.
...from Paying Settlements that are unfairly high
RISK: Suppose that a lawsuit is threatened against you for breach of contract, and your insurance policy would NOT cover your resulting legal fees and liabilities. Suppose both parties expect that a lawsuit would generate a judgement against you for $25,000. However, the would-be plaintiff asks for a settlement payment of $40,000. Why? They know that if the lawsuit went forward your legal expenses would cost you $20,000. So, if the lawsuit went forward, you would be responsible for the $25,000 judgement, plus $20,000 for your legal expenses, plus the value of your time lost. That is over $45,000 total. You are coerced into accepting a $40,000 settlement when you have only done $25,000 of damage. It gets worse if your contract requires that the losing party pay the legal expenses of the winning party. Then you can be coerced into an even higher settlement because the would-be plaintiff knows your alternative to a settlement is paying the judgement and BOTH parties' legal expenses. Even if your insurance company pays the settlement on your behalf, you will likely have to pay an increased insurance premium. There is no winning.
HOW AVOIDED: With expert determination, the cost of dispute resolution is significantly lower and it is capped at the time of contract signing. For expert determination, the cost of dispute resolution might be only $3,000. Again, the losing party pays this cost. Therefore, the maximum settlement that you could be coerced into accepting would only be $28,000 (which is $25,000 + $3,000).
Comparison of Dispute Resolution Mechanisms
|Time required||Determined by court availability and parties||Determined by arbitrator and parties||Minimal because it is fixed in advance, approximately 2 months|
|Cost||Payment for court, attorneys, and expert witnesses||Payment for arbitrators, attorneys, and experts||Payment for expert(s) only – probably less than litigation and arbitration|
|Formal evidence process||Yes||No||Yes|
|Review of decision||Appeal possible||No review or appeal possible, typically||All decisions reviewed for expert’s adherence to instructions|
|Result is private||No||Can be||Yes|
|Occurs in court?||Yes||No||No|
|Damages covered by insurance||Yes, if claim is covered||Yes, if claim is covered||Yes, if claim is covered|
|Legal basis||Federal Rules of Civil Procedure and state law||Federal Arbitration Act of 1925 and state law||State law (e.g. New York CPLR §7601)|
Get the Expert Determination Clause
Why Use an Expert Determination Administrator such as Smarter Contract?
Our expert determination process has a history of being implemented in contracts such as yours.
Unbiased Expert Selection
We will select your expert without bias, because we are not a party to our clients’ dispute.
Anonymity Reduces Bias
Because our process requires that the experts and the disputing parties do not know each others’ identities, there is no risk of bias resulting from an expert’s having a pre-existing relationship with a party. Such a relationship is especially likely when the expert must be selected from the same profession and geography as one of the parties.
Anonymity Prevents Fraud
Because the experts and disputing parties do not know each others’ identities, there is no risk that a party will fraudulently motivate an expert.
Our primary focus is ensuring our process is conducted correctly. If the disputing parties or a selected expert conduct their own process, it may be conducted in a somewhat ad hoc fashion or such that it is unintentionally unfair to one party. Errors in the process can open an expert determination to legal challenge.
Experts know we hold them accountable by only working with those who receive the highest ratings from our expert reviewers.
We recruit experts for your expert determination process.
Because we pay experts based on the volume of material they review, our costs can be lower than those of fixed-price or hourly expert engagements.