ADR is short for “alternative dispute resolution,” which is a term used to describe various methods of resolving disputes without the use of litigation. ADR takes many forms, and these can each have different implications for you, your company, and your relationships with other parties.
As such, the exact meaning it has for you could vary with your situation. It could mean the preservation of a business relationship or the quick resolution of a complex dispute, for instance.
Definition and Types of ADR
Again, alternative dispute resolution is defined as any procedure used to settle a dispute without going to court. Two of the most commonly used methods are:
- Arbitration, in which the disputing parties present their case to an arbitrator who makes a final decision
- Mediation, in which a neutral party facilitates a discussion between the disputing parties, but has no say in what the outcome should be
Other methods exist that are a mix between arbitration or mediation. In addition, some methods are more formal than others, such as summary jury trials, while some are highly informal. Simple negotiation between two parties constitutes ADR, and it can be highly effective in certain cases.
What Does ADR Mean in a Contract?
Many contracts include an arbitration or ADR clause. This clause essentially requires that disputes be handled through the means set forth in the contract rather than going through court. The implications it could have for your company ultimately depend on how the clause is phrased and whether there is a sound plan set forth.
For instance, if the agreement clearly outlines how an arbitrator is to be chosen, how proceedings are to be handled, whether limits on discovery and evidence are in place, whether the final decision is binding, and so forth, then the actual arbitration process can be beneficial. Both parties will be spared the expense of going to court and paying massive legal fees.
On the other hand, if these matters aren’t clearly outlined, a dispute can become long and drawn out as each party interprets the clause differently or seeks advantage over the other. As such, the clause should be well defined to prevent discrepancies or loopholes.
What Could ADR Mean for My Company?
Litigation is costly. In complex disputes, there will be an extensive discovery process in which both parties request information from one another and seek out evidence. That alone can result in high legal fees, and it’s only made worse by court expenses, disruption of normal business operations, and the significant level of risk taken on. Court litigation constitutes a win-lose scenario that could end very badly for one party while the other gets a payout.
ADR can spare you many of these expenses, and the results could be more beneficial as well. In a dispute with a valued business partner, for instance, ADR would be more likely to preserve that relationship while litigation would probably destroy it. Both parties would stand a better chance of getting a result that would benefit them.
In order to get these results, however, it is important that dispute resolution be handled in an effective way. Our attorneys often function as mediators or arbitrators, and Hart David Carson LLP has plenty of experience in business matters, so we can help you through the ADR process.