Dragging another business to court can be a time-consuming and costly endeavor, not to mention the effect it can have on both companies’ reputations. Fortunately, there are several options available that can help you avoid court altogether and still get a satisfactory resolution to your business dispute.
Continue reading to learn more about the benefits of settling business disputes outside of the courtroom through the process of mediation or arbitration.
Settling a Business Dispute Through Mediation
Mediation is the most peaceful option for settling a dispute between businesses. Mediation is non-binding, so there’s no official “ruling” at the end. During a mediation, the mediator—an unbiased third party—works to resolve misunderstandings and see whether there is a solution both parties can live with.
Mediations usually consist of two main stages. First, both parties will give a brief introduction of where they stand, followed by an open question-and-answer session. Second, the mediator splits up the parties and then sits down with each side privately to discuss the case and explore options for a resolution.
Compared to litigation, the advantages of the mediation process include:
- More privacy and confidentiality
- Lower overall cost and time investment
- Higher likelihood of retaining positive business relations
Keep in mind that a successful mediation involves compromise. It’s unlikely that you’ll get everything you want in mediation. However, that’s also true in most court battles, and mediation is cheaper, more efficient, and private.
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Settling a Business Dispute Through Arbitration
Arbitration is like mediation in that an unbiased third party oversees the process. However, an arbitrator must make a formal ruling on the dispute. The arbitration process is like a private court hearing in which the arbitrator listens to both sides and reviews facts, evidence, and witness testimony before coming to a decision. Unlike with mediation, the results of arbitration are binding, so you can’t walk away from the process and take your case to court, even if you think the arbitrator’s decision is unfair.
Although the resolution reached through arbitration is often not as mutually agreeable as with mediation, arbitration is still a better alternative compared to litigation. Arbitration delivers many of the advantages of mediation since it saves time and court costs. However, businesses that go through arbitration may be less likely to continue their association with one another since the final decision often favors one side.
How Do I Arrange a Mediation or Arbitration Proceeding?
Mediation is less formal than arbitration, and you can arrange a mediation just by agreeing with the other party to sit down with a mediator. Sometimes, business contracts include clauses stating that the parties must go through mediation before turning to arbitration or taking the dispute to court.
Some contracts also contain clauses that require arbitration in the event of a dispute. Arbitration can only occur if there’s a signed agreement stating that both companies will submit to arbitration rather than taking the dispute to court.
Both alternative dispute resolution methods can be mandated ahead of time in a contract, but arbitration is only available in the presence of a signed arbitration agreement. If the parties have no existing formal agreement regarding dispute resolution and simply want to explore options, then mediation is the only choice.
If mandatory mediation or arbitration clauses sound beneficial for your business relations, contact an experienced business lawyer for advice on how to amend your contracts.
Law Offices of Kari Santana: Innovative West Michigan Business Lawyers
Considering adding a mediation or arbitration agreement to a new or existing business contract? Call the Law Offices of Kari Santana for more information on how to get started. At the Law Offices of Kari Santana, our business lawyers are experts at analyzing contracts and cases to determine the most cost-effective and profitable method of resolving business disputes for our clients. If you have an existing mediation or arbitration agreement, we can help you file the paperwork necessary to proceed in these alternative dispute resolution methods.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.