Alternative Dispute Resolution and Business

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Disagreements between companies in the business world are inevitable. For one reason or another, many companies find themselves embattled following breaches of contract, employee disputes, or a myriad of other possible differences. Given the litigious nature of our society, many companies rush to file lawsuits in state or federal court (depending on the nature of the dispute) to seek legal remedy from a judge. However, given the time, cost and potential outcomes of litigating in the court system, many businesses are choosing to pursue alternative dispute resolution processes instead. In availing themselves of this remedy, disputes are concluded more amicably, less expensively and more quickly.

Alternative Dispute Resolution is a broad term that includes a variety of methods to resolve a dispute. According to Mose and Kleiner (1999), negotiation is the most basic form of alternative dispute resolution and is the simple process of bringing the parties together to discuss their differences and work toward an acceptable solution (p. 54). This open dialog often allows opposing sides to meet somewhere in the middle of their respective positions and reach an amicable agreement. Participants in a negotiation often walk away from the dispute more satisfied, as negotiation often results in a “win-win” scenario for everyone involved (Bahls & Bahls, 1997, p. 70). This may prove far more desirable for businesses than conventional litigation, where there is clearly a prevailing and losing party.

Another form of alternative dispute resolution is mediation. Mediation is closely related to negotiation, however, all discussion between the parties is facilitated by an “intermediary” who is appropriately called a “mediator” (Mose & Kleiner, 1999, p. 56). The parties and the mediator come together, and each side is given the opportunity to present their version of the events (Mose & Kleiner, 1999, p. 56). The parties then separate, and the mediator goes back and forth from room to room, spending some time discussing the case with each participant and playing “devil’s advocate,” until an agreement is reached (Mose & Kleiner, 1999, p. 56). In the event an agreement cannot be reached, the parties are free to pursue other methods of resolution, generally with the understanding that the disclosures made in mediation are inadmissible in court and will otherwise remain confidential (Mose & Kleiner, 1999, p. 56-57). Mediation is also an extremely desirable option of businesses, as timely mediation reportedly saves parties nearly eighty percent of court costs and attorney fees (Mose & Kleiner, 1999, p. 57). Given that the legal fees and costs in even a minor dispute near a total of $10,000 (even for the prevailing party), mediation is an attractive option for everyone (Bahls & Bahls, 1997, p. 70). The parties can walk away from mediation with a resolution, having spent far less money than if the matter had gone to court. These savings ultimately factor into the company’s bottom line and, ensure continuous cost and quality of services to the consumer.

Arbitration is most akin to litigation, and arguably the most complex form of alternative dispute resolution. Instead of a judge, the parties select an arbitrator (often an industry expert) to govern the proceedings (Bahls & Bahls, 1997, p. 70). An arbitration is structured much like a trial, in that both sides are afforded the opportunity to present an opening statement, followed by a presentation of their case (Mose & Kleiner, 1999, p. 57). Each side also can cross-examine witnesses and offer rebuttal testimony, as well (Mose & Kleiner, 1999, p. 57). The arbitration proceeding concludes with closing arguments, and the arbitrator normally renders his decision back to the parties in approximately thirty days (Mose & Kleiner, 1999, p. 57). Notably different than litigation, there are no appeal rights in arbitration proceedings; the decision of the arbitrator is final (Mose & Kleiner, 1999, p. 57). Litigation in the court system is generally a protracted endeavor, with parties engaging the lengthy discovery and then waiting many months for trial (Bahls & Bahls, 1997, p. 70). Industry experts have also found arbitrator awards to generally be more reasonable than the sometimes exorbitant judgments returned by unsympathetic or uncomprehending juries (Bahls & Bahls, 1997, p. 70). Considering these benefits, arbitration is also an attractive method of alternative dispute resolution.

Alternative dispute resolution has notable benefits for businesses. While litigation may certainly be unavoidable in certain situations, decision-makers would be foolish to discount other remedies available to them and would be wise to explore their options within this forum. With the possibility of reaching a more favorable decision, for less money and in less time, alternative dispute resolution clearly has merit.


Bahls, J. E., & Bahls, S. C. (1997, August 1). Making peace: Alternative dispute resolution could help your business avoid costly lawsuits. Entrepreneur, 25(8), 70.

Mose, D., & Kleiner, B. H. (1999). The emergence of alternative dispute resolution in business today. Equal Opportunities International, 18(5/6), 54-61.