When a dispute arises involving construction claims or any contract dispute, those involved will wonder how they can resolve the issue. Disputes get resolved through settlement or through a binding decision-making process. Mediation involves a mediator who tries to facilitate a compromise settlement. Litigation involves a public judge making a decision. Arbitration involves a private arbitrator making a decision.
Alternative Dispute Resolution
Alternative dispute resolution is a method of resolving conflicts without going through the public court system. The two most common methods of ADR are mediation and arbitration. Many contracts have an “arbitration clause” that require disputes to be resolved through a private arbitration. Some contracts, especially the American Institute of Architects contracts, require mediation is a precondition to arbitration.
Mediation
During mediation, the parties will sit down in a conference room to try to reach a settlement agreement. Typically, the parties are both present with their lawyers, and a mediator is there to facilitate settlement discussions and try get parties past any impasses. After the parties meet face-to-face at the beginning of the mediation, the mediator separates the parties into separate caucus rooms for private discussions. Compromise usually wins the day during a successful mediation. If the parties do not reach an agreement, then the case will advance to arbitration or litigation. Mediation can occur, and often does occur, at some point in the arbitration or litigation process. Mediation is important for understanding the opposite party’s perspective.
Arbitration
Arbitration is basically a trial except the judge is a private citizen that parties have agreed upon to make a decision — the same a judge or jury would. There can be one or three arbitrators depending on what the parties desire. The rules of evidence are sometimes more relaxed in arbitration. In arbitration, the arbitrator is someone often familiar with the type of cases at issue – such as construction cases. Arbitrators can also reign in excessive discovery in the pre-trial phase – which is often seen a benefit of arbitration over litigation. After hearing the evidence, the arbitrators make a binding decision. Unlike litigation, unless otherwise agreed upon, an arbitrator’s decision is final cannot be appealed.