Chapter 4: Dispute Resolution
Business organizations require a risk management plan to minimize the potentially adverse impact of the legal
environment through prevention and a planned reaction to adverse events when they arise.
However, legal problems cannot always be avoided, and it is not in the best interest of the business to avoid all legal
conflicts at all costs.
(Extended example page 71 – 74)
Alternative Dispute Resolution
Alternative dispute resolution (ADR): A range of options for resolving disputes as an alternative to litigation
Negotiation: A process of deliberation and discussion intended to reach a mutually acceptable resolution to a dispute
o Most common, due to:
Allows parties to craft a solution that is suitable for their particular situation
Helps to preserve relationship between the parties
o When to negotiate:
Virtually any type of dispute, at any stage of it
Parties may agree to negotiate, or a contract may require the parties to attempt to negotiate.
o How to negotiate:
Carried out by parties to the dispute, but may be preferable to hire a lawyer, advocate, or counsellor
who has the expertise to help in the negotiations or can negotiate on behalf of the parties
First, investigate the situation to determine the nature and extent of the dispute.
Then, contact the individuals involved both sides of the dispute to clarify the situation.
Whether negotiations will succeed will depend on:
The willingness of the parties to compromise and negotiate in good faith
The nature and significance of the dispute
The priority the parties give to its resolution
The effectiveness of those involved in the negotiations
If negotiations are successful, they enter a settlement agreement so that:
The dispute cannot be resurrected or litigated in the future
The terms of the settlement are not revealed (if confidentiality clause)
o When negotiations fail:
Concede and cut losses
Risk the expenditure of more time and money through litigation
Ask the following questions:
What further steps are available and how long will they take?
Can the business devote the resources necessary to proceed with the dispute in terms of both
the commitment and the time of the business personnel?
Will a lengthy dispute affect the public profile and reputation of the business?
Is the relationship with the other side valuable?
What is the likely cost in terms of legal fees and company time?
Are there worthwhile principles at stake that go beyond the particular dispute?
If the dispute goes to court, what are the chances of winning?
If the court decides in favour of the business, does the other have the assets to pay the claim? Mediation: An ADR process whereby a mediator (a person who helps the parties resolve their dispute) assists the
parties in reaching a settlement of their dispute.
o Popular method of resolving disputes because it:
Is less expansive and quicker than more formal dispute resolution methods
Is private and confidential if the parties choose
Helps to preserve the relationship between the parties
Can result in a resolution tailored to the needs of the parties
o When mediation is used:
Used to resolve business conflicts involving: contract matter, personal injuries, employment matters,
environmental protection, etc.
More successful when the parties are interested in considering each other’s positions
Parties may be required to mediate due to the contract or legislation.
o How mediation works:
The parties choose a neutral third party to act as a mediator who are often lawyers or retired judges
(or if the parties cannot be agreed, is assigned from a roster of mediators)
Usually occurs with the parties face-to-face, but may also be conducted through videoconferencing
The mediator manages the process, organizes the discussion, clears up misunderstanding, and helps
reduce tension between the parties
The mediator does not impose a solution on the parties
o When mediation ends:
When successful, parties enter a settlement agreement setting out the terms, which will help prevent
future litigation concerning the same matter
Mediation is however, not uniformly successful.
Arbitration: Method of resolving for a dispute whereby an arbitrator (a person who listens to the parties to a dispute
and make a ruling that is usually binding on the parties) appointed by the parties make a decision.
o Similar to litigation in that it involves a hearing in which the parties or their representatives make submissions
and the resolution is outside the control of the parties
o Has advantage in that:
The parties can choose the arbitrator before decision making power
Usually cheaper and faster and can lead to an overall sense of satisfaction
Can have the same degree of formality as a litigation if the parties choose
o When arbitration is used:
Works particularly well for most commercial and business disputes because the parties can select an
arbiter with relevant experience and keep commercially sensitive information private
Arbitrator is usually chosen by the parties before a dispute arises through a term in a contract providing
that disagreements arising from the contracts are to proceed to arbitration
In the absence of an arbitration clause, arbitration can be adopted at any point in a dispute
o How arbitration works:
The parties may agree on an arbitrator or have a third party choose o