Running a business in New York involves many different types of challenges. Disputes are bound to arise at some point.
Knowing how to approach business disputes can make a major difference in the success of your business. You may associate business disputes with costly and lengthy courtroom litigation.
Alternative dispute resolution
However, alternative dispute resolution is a smart option to consider before heading straight to the courtroom. Alternative dispute resolution (“ADR”) is a technique designed to help business owners resolve disputes without entering a courtroom.
Arbitration and mediation are two of the most common types of ADR. Although there are many similarities between the two, there are some crucial differences.
An arbitration proceeding is like a courtroom proceeding outside of a courtroom. Each party presents their case to an arbitrator or panel of arbitrators. You may use evidence such as witness testimony or documentation to make your case. After each party presents their case, the arbitrator issues a decision.
The purpose of mediation is to allow both parties to discuss the dispute. Rather than present their case to an arbitrator, the parties are encouraged to talk amongst themselves. A mediator is there to facilitate discussion, help clarify issues and suggest options for resolution.
Unlike an arbitrator, a mediator cannot take sides and has no power to issue an order. If the parties do not resolve the issue in mediation, no order is issued and the case proceeds to litigation.
Both arbitration and mediation have their advantages and disadvantages. You should review these before deciding which one is right for you.
Consider an ADR clause for your business contracts
An ADR clause is a common feature of business contracts. The clause requires parties to attempt to resolve their dispute through ADR before filing a lawsuit.
You are not required to put an ADR clause in your business contracts but it is a good idea. If ADR is successful, you will likely save yourself time and money. If it is unsuccessful, you retain the option to initiate business litigation.