Alternative Dispute Resolution in Contracting - Research Paper Example

Alternative Dispute Resolution (ADR) in Contracting Number: Alternative Dispute Resolution (ADR) in Contracting Disputes in contracts are almost inevitable, even though some sectors like the construction industry are more vulnerable to disputes than the rest. Disputes in contracting have often been attested by numerous court cases that are reported in court proceedings, law reports as well as in various law journals (Sourdin, 2011). Such disputes have severe implications on the projects being undertaken, especially if they are not handled in a timely manner. They become extremely expensive and end up consume a lot of time on top of threatening to jeopardize the whole contract. However, the application of alternative dispute resolution methods significantly reduces cost incurred in solving such disputes among many other benefits that are accrued by parties who resort on applying these techniques. This research paper will explore the alternative dispute resolution in contracting, highlights their advantages and/or disadvantages, recommend steps to prepare for each type of action, and discuss how legally binding the decided outcome of each ADR may be for the parties involved. Alternative Dispute Resolution Processes Alternative Dispute Resolution ("ADR") in contracting refers to the alternative methods of helping the parties resolve legal problems before going to court (Nolan-Haley, 2013). According to American Arbitration Association and Fordham University (2006), ADR refers to the numerous methods that are used to solve disputes without involving the conventional court system. They are associated with numerous benefits such as being less expensive and timely than formal trials as well as providing the needed privacy for discreet matters. Moreover, ADR processes help in maintaining relations with strategic business partners, and provide more flexible and creative resolutions to disputes. Almost all ADR processes involve autonomous third person referred to as a “neutral”, who attempts to constrict the areas of conflict or solve them (Sourdin, 2011). There are four main types of ADR namely negotiation, mediation, collaborative law, and arbitration (Nolan-Haley, 2013). Negotiation Negotiation is one of the less formal and most simple types of Alternative Dispute Resolution (ADR). It involves starting a dialogue between the conflicting parties with the primary motive being to attain understanding, gain advantage in results of dialogue, or resolve points of difference (Sourdin, 2011). During a negotiation, disputants meet informally whether in the presence of a council or not, in an attempt to resolve their differences. In some cases, courts give the disputants an opportunity to first negotiate before a court trial in attempt to reach to a resolution and the court hears the case if only the parties cannot reach to an agreement on their own accord. The disagreeing parties can also solve their differences in a less provocative manner through conciliation, whereby a third party known as conciliator organizes negotiation meetings and delivers messages and offers given by each party. It is crucial to note that conciliators usually do not recommend any solution. Negotiation specialists suggest that there are three main steps involved in preparation of any negotiation. These steps encompasses taking time to think more about what both parties want and their motivators, considering probable resolutions that may provide both parties with what they want, as well as preparing oneself to respond to threats, intimidation, or pressure devices that may throw the conciliator off balance. The main disadvantage of negotiation is the fact that the whole process may be regarded by the court as an informal discussion where none of the party is legally bound, especially if there were no formal contracts. However, items discussed in negotiations may be regarded as legal agreements in some situations, agreements that were arrived at in “good faith”. Mediation This is another popular type of Alternative Dispute Resolution (ADR) process that involves resolution of disputes among the disputing parties with the help of a third party known as a mediator. It is essential to note that the chosen mediator does not necessarily have to be an attorney, a lawyer or any other person in the legal profession. He or she can be any person, or persons that the disputing parties believe that to have the ability to remain objective, help in adding clarity to issues, as well as assist in the whole negotiation process. In most mediation procedures, mediators hold private sessions with each disputed party in attempt to establish the interests of each party and collect information that the parties may not want to disclose to the other party. However, mediators do not side with any party since they remain focused to their main role of helping the disputants review the situation and help them assess alternate means to resolve their issues. Mediation has a timetable, dynamics and structures that “normal” negotiations lack (Association for International Arbitration, 2009). The processes are confidential and they are at times enforced by law. However, participation of the disputant is typically voluntary. Mediation is a suitable ADR process for various types of cases or contract disputes. It is very useful, especially when the disputants have a relationship, whether business relationship or civil relationship that they want to preserve. It is also one of the best options, particularly when emotions are emerging in the way of dispute resolution (Noussia, 2010). An active mediator can hear the parties’ presentation and help them effectively communicate with each other in a non-destructive manner. The main advantage of this type of ADR is the fact that it is not adversarial (confrontational), thus mediators work for the best interest of everyone single party involved. The key disadvantages of mediation as a method of solving contract disputes include having little or less protection of the proceedings and imbalance of power particularly if one side has more to bargain with than the other. Just like negotiations, agreements that are arrived at during mediation that lead to formal contracts can be legally binding. Arbitration Process It is considered as one of the most formal types of ADR (Sourdin, 2011). Unlike mediation and negotiation where the disagreeing parties initiate their own resolution, either on their own or with the help of an expert (third party called "arbitrator", "arbiter" or "arbitral tribunal"), arbitration procedures involve a neutral party reviewing the dispute and hearing the case presented before making a decision. The process of preparing for an arbitration hearing is almost similar to a trial because the injured parties present evidence to support their claims, and witnesses can be summoned and questioned by the disputing parties. After the whole presentation, arbitrators conclude the whole process by making a final decision usually referred to as an award. Awards given by the arbitrators can be legally binding, especially where arbitration is authorized by the court, and in some instances not legally binding, particularly if either party would like to dispute the award hence proceeding to litigate the case. Business organizations usually write arbitration clauses in the papers of contracts in order to specify that any contract dispute that may arise will be handled through arbitration rather than the expensive litigation procedures. Various countries have statues that are based on the Uniform Arbitration Act of 1955 that help them enforce arbitration clauses and might even authorize arbitration for some types of public disputes. The arbitration process can be mandatory or voluntary, and/or binding or non-binding as mentioned earlier (Noussia, 2010). For a binding arbitration, parties surrender their rights to a trial and agree to accept the arbitrators decision as final, meaning that there is no right to appeal the arbitrator’s decision. For non binding arbitrations, the parties are given freedom to request for a trial, especially if they are not comfortable with the arbitrators decision. By one definition arbitration is binding and so non-binding arbitration is technically not arbitration (Sourdin, 2011). Cases for Which Arbitration May Be Appropriate Arbitration is the best option for cases whereby the disputing parties want a third party to decide the result of their disagreement for them, but do not want the formality, time, and expense of a trial. It is also most appropriate for complex and technical matters like construction contracts where the disputing parties want a trained and experienced decision-maker in the subject matter of the dispute (Association for International Arbitration, 2009). Collaborative law Collaborative law, also known as collaborative practice, divorce, or family law is another type of Alternative Dispute Resolution (ADR) process that is used primarily to solve disputes in marriage and civil contracts. It is legal process that allows couple who have decided to seperate or divorce or terminate their marriage union to work with their lawyers (Association for International Arbitration, 2009). The process is voluntary and it is initiated immediately the couples sign contracts referred to as the “participation agreement”, which binds each other to the procedure and disqualify their individual lawyer’s right to represent either party in possible future family related litigation. Beyond these four main types of alternative dispute resolutions, there exist other ADR methods even though some of them are not widely known. They include case evaluation, neutral evaluation, Family group conference, and Neutral fact-finding just to mention a few. General advantages of Alternative Dispute Resolution (ADR) processes In general, the main advantages of using ADR processes in solving contract disputes include the aspects of saving time and money, increasing control over the process and the outcomes as well as improving attorney-client relationships. ADR methods also increase disputants’ satisfaction as well as preserve their relationships. Saves time and money Application of ADR approaches in solving disputes save time in that, conflicts are usually settled much sooner, often in a matter of months if not after a couple of weeks. Bringing a lawsuit on the other hand can take over a year before the disputes are settled. Swift resolution of the disputes at hand also saves the disputant large sums of money. In addition, ADR methods eliminate attorney charges, experts fees, and court costs among other major litigation expenses. Increases control over the process ADR processes also increases control over the process and the outcome of the case (Association for International Arbitration, 2009). In ADR, disputants generally play a bigger role in determining both the dispute resolution process and its outcome. In most ADR procedures, disputing parties are given more opportunity to explain their side of story compared to the opportunity they are given during court trials (Association for International Arbitration, 2009). In addition, some ADR procedures such as mediation allow the disputants to design creative resolutions that may not be available in trials. Other processes like arbitration create room for the parties to select a well-trained and experienced expert in a particular area to decide the outcome of the dispute. Judges may not understand the terms and the way some industries operate because their area of expertise is law. However, arbiters in the fields that the dispute is based in can have a better understanding thus increasing chances of making the most prudent decision. Preserve the relationships between the disputants Alternative Dispute Resolution (ADR) processes also play a crucial role in preserving the relationships between the disputants, an element that is very essential for any business organization in whatever industry. ADR processes are often less adversarial and hostile thus preserves the business and civil relationship that the parties could be having before the outbreak of the dispute (Chatterjee & Lefcovitch, 2008). For instance, an experienced mediator or arbiter can help the disputing parties communicate their point of view and needs to the other party in an effective way. This can be a crucial merit especially where the parties have a relationship to preserve. Increase Satisfaction In all types of court trials, there is typically the loser and the winner where the loser is not likely to be unsatisfied or happy, and in some instances even the winner may not feel completely satisfied with the decision made. This is not the case for ADR techniques because the mediators, arbiters and the disputants themselves look for the most appropriate win-win solutions while providing possible alternatives, still focusing on achieving their real goals (Chatterjee & Lefcovitch, 2008). This incredible option together with other ADR potential advantages tends to increase the parties’ overall satisfaction with both the dispute resolution process and the outcome. Improve Attorney-Client Relationships Attorneys also benefit significantly from ADR because disputants and other observers do not look at them as combatants, instead they look at them as problem-solvers. This helps them build a good reputation and relationship with both parties thus increasing their chances of being recommended for other related cases. Quick, cost-effective, and satisfying resolutions are likely to produce happier clients and thus generate repeat business from clients and referrals of their friends and associates (Nolan-Haley, 2013). The popularity of Alternative Dispute Resolution (ADR) processes Alternative Dispute Resolution (ADR) processes have become very popular in the 21st century, both to the general public and in the legal profession. This is despite the intense and historic resistance to these processes by various renowned parties and advocates in the 20th century. As a matter of fact, some courts in most countries now require disputants to apply ADR processes of some type like mediation, before they file their cases for trial. Sources show that some countries are even contemplating to introduce the so-called "compulsory" mediation. The growing popularity of ADR processes can be attributed to the cumulative caseload in traditional courts, the believe that ADR processes impose fewer expenses compared to litigation, an inclination for confidentiality, and the desire of some parties to have greater control over the selection of the individual or individuals who will decide their dispute (Nolan-Haley, 2013). Senior judiciaries in some jurisdictions such as the England judiciary are strongly in favor of the use of mediation to settle disputes (Nolan-Haley, 2013). According to a report that was released in 2010 by a survey that was conducted by the Northwestern University School of Law, the average litigation outlays per company had increased by seventy-three percent, while the average litigation outlays for all the twenty companies surveyed had increased by one hundred and twelve percent between 2000 and 2008. The study also revealed that the each company studied spent over $120 million in legal fees in 2008 alone. This confirms how expensive litigation can be compared to other Alternative Dispute Resolution (ADR) processes such as arbitration. Legal fees are necessary in doing business even though they are highly costly, thus end up affecting the organization’s profit as well as its bottom line. Therefore, managers at all levels of the company must not only understand the laws and regulations that affect their business, but they also need to be aware of and understand that there are options to reduce and/or even avoid legal fees through to use of Alternative Dispute Resolution (ADR). In conclusion, Alternative Dispute Resolution ("ADR") processes are the alternative methods of helping the parties resolve legal problems before going to court. They are associated with numerous benefits such as being less expensive and timely than formal trials on top of providing the needed privacy for discreet matters. Moreover, ADR helps in maintaining relations with strategic business partners, and provide more flexible and creative resolutions to disputes. Negotiation, mediation, collaborative law, and arbitration are the four main types of ADR that are commonly used even though there exist other forms of ADR processes such as case evaluation, neutral evaluation, Family group conference, and Neutral fact-finding just to mention a few. References Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form Bottom of Form Top of Form American Arbitration Association., & Fordham University. (2006). ADR & the law: Developments in the law: 2003. Huntington, N.Y: Juris Publishing, Inc. Association for International Arbitration. (2009). Alternative dispute resolution in the energy sector. Antwerpen/Apeldoorn: Maklu. Chatterjee, C., & Lefcovitch, A. (2008). Alternative dispute resolution: A practical guide. London [u.a.: Routledge. Nolan-Haley, J. M. (2013). Alternative dispute resolution in a nutshell. Leichhardt, N.S.W: The Federation Pr. Noussia, K. (2010). Confidentiality in international commercial arbitration: A comparative analysis of the position under English, US, German and French law. Berlin: Springer. Sourdin, T. (2011). Alternative dispute resolution and the courts. Leichhardt, N.S.W: The Federation Pr. Bottom of Form Read More