Many people confuse ‘mediation’ with ‘arbitration’, and some use the terms interchangeably. Fear not, you will never do that after reading this short breakdown.
“Mediation” is a voluntary settlement conference where opposing parties attempt to settle their dispute using a 3rd party mediator, usually a lawyer or retired judge. The mediator does not make any decisions but merely tries to get the parties to settle their dispute through a back-and-forth process of negotiation.
“Arbitration” is a process by which the parties to a dispute submit evidence to an Arbitrator who eventually issues a decision, similar to a Judge in civil court. Witnesses are presented to testify and participants can present documents for the arbitrator to consider.
Many contracts have a provision that requires the parties to submit any dispute that arises from the performance (or non-performance) of the obligations set forth in the contract to arbitration. Most states enforce these ‘arbitration clauses’, and since they result in a waiver of the right to submit a dispute to the court system some states require the parties to initial the particular provision so that it is not overlooked.
The “Arbitration “ clause in a contract can designate who the arbitrator will be (if a dispute arises) or it can designate an arbitration company, such as the American Arbitration Association, to provide an arbitrator and conduct the arbitration under its rules. In order to invoke the arbitration clause one must file an arbitration claim as dictated by the Arbitration clause.
Should you agree in advance to submit any dispute you may have to arbitration as opposed to simply reserving your right to file a lawsuit in Court? There are pros and cons to consider. The major ‘con’ to arbitration is that there is no jury and the decision of the arbitrator is final. Except in rare situations, there is no appeal from the decision of the arbitrator. In many cases, the ‘pros’ outweigh the ‘cons’. Arbitration is generally less expensive than going to court. Also, parties can achieve an outcome much quicker using the arbitration process, as many courts are backed up and you could wait years for a trial date. The arbitration process is often times less formal than regular court, so it’s easier to navigate if one decides to represent themselves (although not recommended). The decision of the arbitrator, or ‘judgment’, is also just as enforceable as a judgment achieved in court, by filing the judgment in the court of the appropriate jurisdiction.
Arbitration is becoming more and more popular for many reasons. You may notice that many of the contracts you sign contain an arbitration clause, so you should consider
this prior to agreeing to sign the contract. Our firm can answer any questions you may still have or represent you if a dispute arises.
Business Law Southwest. Business law that makes business sense.
