When it comes to negotiating a contract, one often-overlooked subject is ADR—Alternative Dispute Resolution. The whole purpose of your contract is to set forth the rights and obligations of each of the parties. But what happens if one of the parties doesn’t live up to its end of the bargain? As the name implies, alternative dispute resolution is an alternative to the high costs of litigation.
The two most common forms of ADR are arbitration and mediation. In contractual arbitration, the parties voluntarily agree to let a neutral third party or third parties decide the dispute at issue. The decision is usually binding. The advantage to arbitration is that the parties can select the neutral “judge,” who commonly has a lot of experience in deciding the issues of your particular matter.
From an economic standpoint, arbitration is much less costly than a jury trial. The parties themselves get to make key decisions about the process such as whether discovery will be allowed or whether witnesses can be subpoenaed. A major advantage of arbitration is that it evens the playing field. The person with the bigger pocket book can usually exploit the other party in a lawsuit by expending money on attorney’s fees.
In arbitration, the proceedings are much shorter, and the parties control the speed at which they progress. The proceedings themselves are private whereas court cases are matters of public record. In arbitration, the proceedings are informal. The arbitrator is typically not bound by rules of evidence or rules of law. Once the decision is rendered, it is usually final. The award is then confirmed in court and once confirmed, it carries the same weight as a judgment after trial, with one major exception—the right to appeal. Rights to appeal in arbitration are virtually non-existent.
The other type of alternative dispute resolution typically encountered is mediation. Like arbitration, with mediation, the parties have a lot of room to choose the person who will be mediating the dispute. The major difference between mediation and arbitration is that there is no final binding decision rendered in mediation.
Contact the Law Offices of Richard Marcus for all of your business litigation and family law needs at 661-257-8877.