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Will the ADR clause in your contract help you avoid litigation?

Litigation is sometimes the only way to resolve a business dispute. However, there are drawbacks to bringing your business problems into the courtroom.

Another option is using mediation, a form of Alternative Dispute Resolution or ADR, to settle your issues. You and the other party may already have an ADR clause in the business contract you signed.

About ADR

Alternative Dispute Resolution offers a choice of mediation or arbitration to resolve business disputes without having to resort to litigation. The difference is that the result of arbitration is legally binding. Not so with mediation. In this form of ADR, the parties agree to abide by a decision but can go to court with their claims if they cannot reach a settlement. The goal of mediation is for parties to discuss their issues in an informal, low-pressure atmosphere where the focus is on open communication. A trained mediator is on hand to help keep discussions on track and facilitate negotiations.

Benefits of mediation

First, mediation is a private process with an outcome over which the parties have control. In addition, it is usually a more economical approach to settling a dispute than going to court. Litigation means subpoenas, depositions, document requests, a trial and more, with the accompanying costs. Mediation takes much less time and is much less expensive. The parties split the costs of mediation, which are nominal as compared with court appearances.

The other options

If the parties who are in dispute cannot resolve their differences during mediation, they can still pursue litigation. They can also choose arbitration as an alternative. However, for those who are willing to work together, mediation may be an effective way to resolve a business dispute in keeping with the ADR clause in their contract.