Key Terms
Alternative dispute resolution (ADR)
Any method of resolving disputes outside the judicial (court) process.
Why ADR exists
Litigation is expensive, slow, public, and can destroy ongoing business relationships. ADR addresses all four problems.
Federal Arbitration Act (FAA)
Federal statute that requires parties to participate in arbitration when they have agreed by contract to do so; applies
Result
The mediation outcome becomes binding through contract law, not through the mediation process itself.
Negotiation
ADR method in which the parties retain ALL power to resolve their dispute. No outside party has decision-making authorit
Process
Parties define the conflict and agree on an outcome, often through compromise.
Unequal bargaining power
When one party has significantly more leverage than the other in a negotiation.
Example pattern
A small buyer who depends entirely on one supplier for a unique product has weak bargaining power; the supplier who does
Mediation
ADR method in which parties work to form a mutually acceptable agreement with the help of a neutral third party (the med
Like negotiation
Authority stays with the parties; either party can end mediation at any time. Unlike negotiation: a neutral third party
Mediator
Neutral third party who acts as a go-between for the parties, facilitating agreement.
Typical sequence
Discovery occurs; court orders mediation before trial; if mediation fails, case proceeds to trial before judge or jury.
Arbitration
ADR method in which parties vest authority in a neutral third-party decision maker (the arbitrator) to hear their case a
Unlike mediation
The third party DOES have decision-making authority.
Unlike litigation
Less formal rules, often faster, often less expensive.