Mediation and Arbitration

If you are in breach of contract, or are on the receiving end of a breach of contract, you may be able to settle the dispute by way of mediation or arbitration. In the first instance, though, you need to check the terms of the contract to see whether mediation or arbitration is expressly mentioned. If it is, there may be provisions in the contract that explain what each party needs to do in the event of a dispute.

Before you decide whether alternative dispute resolution (or ADR) is right for your particular problem, you will need to consider the differences between the different types of ADR and the potential outcomes that can be achieved.

Arbitration

Arbitration is the most well known form of private dispute resolution. The outcome of any arbitration is binding. The decision to resolve your dispute is made by a third party – the arbitrator. If you have an arbitration clause in your contract it could be that you are both expected to try to agree on a suitable arbitrator to conduct your arbitration.

Depending on how lengthy or complex your contract is, there may already be provisions relating to how many arbitrators need to be chosen, and how an expert would be appointed, if necessary. Arbitration is seen as an alternative to court, because there are rules for elements of the process such as disclosure and evidence. It can avoid the stress and expense of having to go to court, but there are still costs involved. Some arbitration procedures can be paper-based only, which means that you don’t actually have to attend a hearing or meeting.

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Mediation

If you and the other party agree to go to mediation, this is essentially a private form of negotiation which is assisted by a mediator. The process is initially non-binding, so you are not bound by an outcome if you are unable to reach a settlement. If you do, however, reach a settlement the mediator can draw up a contract to reflect the agreement that has been reached. This contract, once signed by both parties, is legally binding. A similar kind of dispute resolution is ‘concilliation’. As well as being able to come to your own agreement, the ‘concilliator’ can also suggest their own solution to your dispute (which you do not have to agree to.)

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How Mediation and Arbitration Co-Exist

Mediation can be carried out at any part of an arbitration process or by itself. This means that you can put any existing arbitration on hold until you have carried out mediation. The mediator’s function is essentially to establish what the dispute is about, where both parties stand currently, and work out what is important to each side. Priority will be given to the most important areas that need resolution. Once these have been established, the mediator identifies areas where both parties overlap in order to help both sides to reach a compromise. Their role extends further than this, however. They can also propose areas for discussion that were not previously part of the original dispute, and make suggestions about alternative solutions. If you are unable to come to an agreement via mediation, you can always go to arbitration or resort to litigation.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Contract Red Flag Checker lets you describe a contract you are about to sign and get a plain English summary of the clauses that could hurt you. Takes about 2 minutes. Try it now →