Many businesses in Texas face contractual issues from time to time, and knowing how to resolve them is important for all business managers. Settling business disputes does not necessarily require a lawsuit. While there are cases that must be litigated, many others can be resolved using alternative dispute resolution processes known as mediation and arbitration.
There are advantages and disadvantages to both, and some business contracts even require arbitration as a form of business dispute settlement. There are distinct differences between the two types, and the results can be very different as well.
Mediation is often the most effective method of resolving business disputes because of flexibility. Discussions are held between the contesting parties with each side being able to present their position in an informal, private format where a mediator offers potential settlements to the problem. It is not a public forum, and the typical resolution is an altered contract or a new enforceable contract agreement that avoids litigation completely. Cases that are unresolved can still be litigated or go to arbitration.
Arbitration is a much more restrictive process than mediation. It is a formal court procedure whereby all parties submit their claims to an independent arbitrator, who then evaluates the material case facts and issues a ruling based on how the law applies to the disagreement. The contested issue is not necessarily discussed in open court after argument submissions. However, each party will usually have a legal representative clarifying all aspects of their case as presented in the submitted documentation. While mediation is a private negotiation where discussed information is not released in publication, arbitration is a public court forum with no opportunity for an appeal for either party following an unfavorable decision.
It is important for all Texas business owners and managers to understand the difference between these two primary forms of ADR when negotiating any business disputes. Mediation can work well in some situations, but it does not always result in an acceptable agreement. Those with the law on their side might choose arbitration.