Businesses involve contracts, ventures, arrangements, and agreements with other business entities. Sometimes, these transactions turn into disputes. Business disputes arise when one or more party fails to honor their end of the deal in an agreement. This causes both parties to argue with each other. This at times leads to legal actions.



If all these disputes lead to court actions, every court all over the United States will be crowded with business dispute cases. Hence, the Alternative Dispute Resolution was born. This aims to encourage out of court settlements instead of litigation processes.

The Alternative Dispute Resolution or ADR is a series of positive and organized procedures for resolving disputes with the mutual consent of the parties involved. ADR encourages the parties to engage in negotiations to settle the dispute.

Business owners have options in dealing with this matter. They have four options to be precise. These are the following:

1. Direct Negotiation

Direct negotiation is a dispute resolution process wherein the two disputing parties work together and come to a resolution on their own. The parties communicate directly with each other without a third party who shall oversee or help with the dialogue.

This resolution process is the cheapest way to resolve a conflict. It needs no court fees, attorneys' fees, or other payments. It only requires that the two parties are there, willing to exchange sides regarding the disagreement. This form of resolution calls for effective planning, communication and negotiation skills.

2. Arbitration

This is a resolution wherein the parties in a dispute refers it to a third party, called the “arbitrators.” The neutral party listens to the problems and arguments of both sides, examines their evidence, and renders a decision (award) after careful analysis.

Arbitration awards are generally an award of damages against a party. Both parties are bound to agree to the award, this is referred to as the “binding arbitration.” The arbitrator's decision is final.

3. Mediation

Mediation is another form of resolution which aims to make disputing parties reach an agreement. The parties meet together with a mediator/s. In this case, the mediator assists them in the negotiation of their differences, but leaves the power to decide between the parties. The parties should be able to come to a mutual decision.

Mediation starts on a joint session and then proceeds to a separate caucus between the mediator and each individual party or their attorney. Mediation is strictly confidential. Thus, everything that is said and discussed in this process will be held in private and cannot be deemed admissible in court or in any other proceedings.

4. Litigation

If the parties cannot settle into an agreement by using an alternative dispute resolution, then their last option is to file a civil case in court. The purpose of business litigation is to determine which side is right or wrong.

Majority of business disputes do not go this far since it entails the most drawbacks. The whole process involves a lot of work, and consumes substantial amount of time and money. However, it is still considered a suitable option.

Nevertheless, most legal actions should not have happened if only companies did abide with the terms of the business agreements they got involved with. Hence, it is very advisable to seek the aid of a business lawyer before engaging in any type of business agreement. This to fully understand the possible advantages or consequences that one may get from such contacts.