Business Law

Advantages and Disadvantages of Alternative Dispute Resolution Methods

alternative dispute resolution methods

Regardless of if you are facing a disagreement among shareholders, broken contract, or another issue, the possibility of your business facing a dispute is something that’s nerve-wracking. Trying to prepare to handle the dispute is something that may risk taking energy, resources, and time away from the day-to-day operations of your business.

While this is true, not all disputes have to wind up being decided in a Texas courtroom. Whether it’s due to the wishes of both parties or a clause found in a contract, alternative dispute resolution methods provide a chance to find a solution in a more affordable and collaborative manner.

Alternative Dispute Resolution Explained

The two most commonly used alternative dispute resolution methods used for business disputes include arbitration and meditation. Meditation is a process that involves a neutral, third-party mediator who works to achieve a mutual agreement between the two (or more) parties involved.

With arbitration, a neutral third party is also involved, who is referred to as the arbitrator. This is a more formal process, and as a result, the results made through the arbitration process are usually binding.

What are the Advantages of Mediation and Arbitration?

There are several advantages offered by using meditation or arbitration to settle a dispute, which include:

  • Save money: Both meditation and arbitration can help business owners save money by working to bypass the otherwise expensive litigation process.
  • Save time: Each of the methods is faster and more streamlined in the approach used to achieve a resolution.
  • Maintain privacy: Unlike traditional litigation, the contents of the disputes that are resolved by using meditation and arbitration stay confidential.
  • Have more input: With litigation, the judge and jury decide on the outcome of a dispute, but with this both parties get more input.
  • Ability to mutually decide on the third party: Moving forward with these methods, both the parties need to agree on a neutral party for exploring possible solutions.

Also, another advantage of these alternative methods is the ability to preserve the business relationship after the dispute is resolved. This is especially beneficial for those who are facing a dispute with a longtime client, shareholder, or partner.

Possible Disadvantages of Meditation and Arbitration

Even though there are several benefits of meditation and arbitration they also have disadvantages. Each method has the potential to conclude with no resolution. If this occurs, the parties may move forward and go to trial, but this all depends on the terms of the actual dispute. Unfortunately, this also results in higher costs, along with more time spent attempting to reach a decision.

Also, with some business disputes, you may benefit from a binding decision that is issued by a jury or judge. After all, the appropriate method for resolving a dispute is dependent on your situation. As such, it’s a good idea to use the services of an attorney to know ow to move forward.

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