How to Settle Business Disputes

by JRO on June 15, 2013

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Unfortunately, business disputes have often become a regular aspect of any business’ day to day activities. Whether such a dispute arises out of equity and debt financing, supplier and customer relationships, intellectual property disputes, contractors for commercial loans, licensing and employment, corporate transactions, or any of a number of other common business interactions, it is important for any business owner to understand the available methods for resolving such arising difficulties. While most people are familiar with the typical civil justice process of litigation where a judge or jury decides which party is in the wrong, there are other options available. The best of the possible alternative dispute options available for conflicting businesses are negotiation, mediation, and arbitration.

Negotiation

Negotiation is perhaps one of the best known of the above alternative dispute resolutions. This is the bargaining between business parties with the aim of finding an agreeable middle ground. In negotiation, businesses typically negotiate directly with each other; however, attorneys may be hired to negotiate on behalf of the business leaders. Negotiations can be used at any stage of a business dispute, whether it is before a lawsuit is filed, during a lawsuit, or at the conclusion of a trial or appeal. The important thing to note about this form of alternative dispute resolution is that there are no real legal or specific procedures to follow, the negotiation processes is determined by the individuals involved and works so long as those involved individuals adhere to respectable discourse. Negotiations are completely voluntary and have the benefit of being both private and confidential as well as quick and inexpensive.

Mediation

Mediation is also a voluntary process that can be utilized by conflicting businesses. However, while negotiation involves only the disputing parties seeking a middle ground solution, mediation involves an impartial third party to aide with communication and promote a mutually acceptable agreement between the conflicting business parties. In this process, the mediator acts to facilitate the negotiation and can help with separating different points of views. Mediation should be utilized when and where negotiations fail. Businesses may be able find local mediation organizations—otherwise, an impartial attorney or other similar professional may be hired for a fee as a private mediator. Mediation, like negotiation, can prove to be a lot less costly than litigation and can result in a win-win solution for all involved parties. In addition, the mediator can help with reducing hostility by promoting shared understanding in order to preserve business relationships.

Arbitration

Arbitration is similar to mediation in that an impartial person is involved in the business dispute. However, while a mediator seeks to find a solution made between the parties, in arbitration the arbitrator will decide upon the solution. In other words, the arbitrator controls the process by listening to either side of the dispute and making a final, binding decision; similar to a judge, but outside the lengthy and costly court process. Often before arbitration, both parties must agree to adhere to the final settlement and by choosing this process both parties waive their right to a trial in court. Arbitration is generally used in labor and wage disputes, but can be utilized in any business dispute.

Negotiation, mediation, and arbitration are all voluntary forms of alternative dispute resolutions. Court costs and the time spent at court can potentially cripple a business. By choosing one of these three alternatives, businesses can not only save themselves time and money, but can potentially save and preserve business relationships that may otherwise be unnecessary severed.

This piece was composed by Ralph Swanson, a freelance writer based in San Antonio, Texas. Ralph writes on finance, law, investment advice, business, taxation, accounting, banking and other related topics; those curious about the world of finance may want to check out the finance jobs with moneyjobs.com by visiting moneyjobs.com.

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