Contract formation is when parties decide whether disputes will go to court or arbitration and whether mediation is required in the agreement. There are pros and cons with both arbitration and litigation. We counsel, advise and draft appropriate dispute resolution procedures at this stage. Mediation and arbitration are frequently termed “Alternative Dispute Resolution” or by the acronym “ADR,” meaning they are alternatives to a public court. There are many factors that come into play in such a decision: expense, right of appeal, speed of resolution, right to jury, qualifications of judges versus arbitrators, and privacy. In many types of contracts and industries arbitration is standard. Often banks or construction firms will require mediation in contracts that are not very negotiable. The lion’s share of securities agreements require arbitration.
Mediation: Mediation is a non-binding procedure. Courts almost always require mediation as part of pre-trial procedure. The parties can also arrange it on their initiative. Some construction and real estate contracts require parties to mediate before any type of legal action is started—the theory being that an early settlement should be tried before money is spent on lawyers in court. At a mediation, the two (or more sides) work with a mutually selected mediator to attempt to reach a resolution. It is often a good place in a case to see if the case can be settled. The adage is that a good mediated settlement is where both sides are equally pleased and displeased. We play a critical part in the mediation process.
Arbitration: Arbitration is litigation outside a court. It is binding – meaning one party wins and one loses. There is no appeal. A trial is a called “hearing,” and the judge or jury is a private and paid “arbitrator” assigned to your dispute by the terms of a contract. An arbitrator or panel of arbitrators hears both parties’ cases; the process can be simple or just as complicated and involved as any major lawsuit. The arbitrator’s decision is called an “award.” The award can then be enforced in a court by federal or state law. The skills and experience gained and used in trial are the same as those necessary in arbitration. We are very experienced in arbitrations.