Problems in business relationships can be expensive, time consuming, and detrimental daily operations. When a Michigan company or entity finds itself embroiled in a dispute with a vendor, contractor, or other party, they may feel as though litigation is the only possible way to settle their conflict. However, in some situations businesses and their directors may be able to move past disagreements through alternative dispute resolution methods.
This post introduces some of the different types of alternative dispute resolution (ADR) that some entities build into their business contracts. This post should not be read as legal advice. Questions about this and other business law subjects should be directed to trusted business and commercial law attorneys.
Types of alternative dispute resolution
Alternative dispute resolution is a system of conflict resolution that keeps disagreements out of courtrooms. The benefits of ADR often involve reduced costs from avoiding litigation and improved satisfaction in the outcomes of ADR decisions. There are two general types of ADR that businesses may choose to use to resolve their conflicts.
- Mediation: Mediation happens between two conflicting parties and is facilitated by a neutral third-party mediator. The parties work together to find resolution and the mediator facilitates rather than mandates outcomes.
- Arbitration: Arbitration occurs when two conflicting parties appear before an informal adjudicator who ultimately issues a decision regarding their conflict. Arbitration can be binding if it is agreed to by the parties.
The availability and type of ADR that businesses may use to settle their differences may be indicated in their contracts.
How to approach alternative dispute resolution
Like litigation, ADR can feel stressful and difficult. Individuals whose disputes end up going through ADR do not have to prepare for their arbitrations and mediations alone. Many business law attorneys support businesses as they work through conflicts in ADR. Before hiring a firm to support a business with legal matters, it can be beneficial to first ensure that they are knowledgeable and supportive of ADR processes.