Should you include mediation as ADR in your business contract?

Many businesses will face one or more lawsuits in their lifetime, but litigation is not the answer for all disputes.

Mediation is a form of Alternative Dispute Resolution (ADR) for helping parties settle their differences. Should you include this option in your business contract?

About ADR

According to data from the Federal Mediation & Conciliation Service, which mediates labor disputes, 87.1% of the 2017 negotiations in which the agency took part settled through mediation. In most cases, ADR is a less expensive and lengthy method for resolving business disputes.

Objectives of the process

Open communication between the parties is key to mediation success. They meet in a private, low-pressure environment to talk over their differences and arrive at a mutually agreeable settlement. The mediator facilitates discussion and negotiation by working with the parties both individually and jointly. A mediator is usually an attorney who can provide access to legal information to aid in the discussions and suggest ways to resolve any sticking points that arise.

Who benefits

ADR does not work for every issue. Some business disputes may be too complex or bitter, and some parties are not amenable to settling their disputes except through litigation. However, those who are open to discussion in a private setting prefer the less stressful, contentious and costly method of settling a dispute. Mediation does not produce winners or losers. Instead, both parties involved benefit from an outcome to which they both agree. For this reason, many business contracts today include ADR provisions that allow them to attempt to resolve disputes through mediation before submitting to arbitration or litigation.