Key Terms
Alternative dispute resolution (ADR)
Any method of resolving disputes outside the judicial (court) process.
Three most common ADR methods
Negotiation, mediation, arbitration.
Think of it as a continuum
Most party control (negotiation) → shared (mediation) → least party control (arbitration).
Federal Arbitration Act (FAA)
A federal statute requiring parties to participate in arbitration when they have agreed by contract to do so — even in s
Negotiation
ADR method in which the parties themselves retain full power to resolve the dispute. No outside party has decision-makin
Process
Parties define the conflict and agree to an outcome — often through compromise.
Unequal bargaining power
When one party has a significantly stronger position than the other. Example: a small buyer who needs a specific product
Mediation
ADR method in which parties work toward a mutually acceptable agreement with the help of a neutral third party (the medi
Like negotiation
Parties retain authority. No one is forced to accept a resolution.
Unlike negotiation
A neutral third party is involved and sets ground rules.
Goal
Win-win outcome.
Mediator
A neutral third party who facilitates agreement between the parties.
Arbitration
ADR method in which parties vest authority in a neutral third-party decision maker (the arbitrator) to hear the case and
Arbitrator
A neutral decision maker who acts like a judge during arbitration proceedings.
Mandatory arbitration
Parties must arbitrate because (1) they signed a contract with a mandatory arbitration clause, or (2) state law requires