Any smart businessperson has to have a basic knowledge of how to resolve legal disputes to confront legal challenges when it relates to their business. If you get sued, it is going to be your money and assets on the line. This is why you want to know the different ways a legal dispute can be resolved so you can know ahead of time what you are up against.
A negotiation is an informal legal proceeding where parties sit down and debate the potential resolution to their legal dispute. A negotiation is typically a private proceeding that has no defined set of rules or procedures. Negotiations can take place over the course of multiple phone calls over the life of a claim, but they can also be scheduled as an event. In a negotiation, there is no decision maker or independent referee. A negotiation involves the parties sitting side by side trying to resolve the dispute. If the parties do not settle, it does not have any impact on the dispute minus the fact that it is still unresolved.
The parties are also eligible to continue negotiations after they sit down together. When making offers in a negotiation, be able to justify any number that you put on the table because if you cannot do that, then it makes the other side feel like you are not taking them seriously. When you're reviewing offers, make sure to calculate the midpoint between where you in the other party are because that will tell you pretty much where you will end up.
Mediation is an informal proceeding where a mediator does his best to bring the parties to a settlement. The mediator typically should not have any special relationships with them because they are supposed to be a neutral party. To attend mediation does not imply guilt or innocence by either party in the legal dispute. Starting Business offers mediation templates that you can have your customer sign if you want to take any legal disputes to mediation in order to be resolved. Please review the documents that we have on our website for how they can assist you.
Mediation starts with an introduction from the mediator about the process. Then, both sides are given the opportunity to give an opening statement. This is the chance for both sides to state their positions and give an opening offer. The parties will then enter into what is called a caucus where the parties are put in different rooms. Then, they go back-and-forth with offers where they try to meet in the middle and reach a settlement. Throughout this process, the mediator will try to push the parties further and further to give up as much as they can so they can settle. If they reach a settlement, then the mediator will usually fill out a form with the details of what each party is getting regarding money or what they are obligated to do in the future.
However, if the parties do not settle, then the mediator will thaw out a form called an impasse, and they will then have to pursue their action in court.
Arbitration is an alternative to both litigation and mediation where an arbitrator will act as a judge and make a binding decision. Usually, the parties would agree for a dispute to be settled by arbitration by incorporating an arbitration clause into the contract they are entering into. Starting Business has many templates that you can purchase to put into your contracts so that any legal disputes between the parties will be resolved by arbitration.
This is different from litigation because the arbitrator is not an elected official and there is usually no right to an appeal unless the court reviewing the appeal finds that the arbitrator was not fair in his decision. Many arbitrations are conducted similarly to a trial. Both sides will be eligible to make opening statements. Then, they will be able to call witnesses and enter documents into evidence for the arbitrator to consider. Once all the evidence and testimony have been heard, the parties will make closing arguments. Then, the arbitration tribunal will make a decision.
Arbitration is generally more favorable to businesses because arbitrators are more likely to give favorable treatments to companies, as opposed to a jury, as arbitrators are normally appointed from a panel of arbitrators who have had practical experience in the industry/subject they arbitrate, whereas this may not be the case with a court judge.
You need to make sure that your contract clearly provides for disputes to be settled by arbitration and the waiver of a right to a jury trial worded in such a way that the person signing the document clearly understands the constitutional right they are giving up. Starting Business has these documents available on our website.
Before you consider arbitration as the venue you want to use to resolve your legal disputes, understand that arbitrations are not cheap (although they are certainly cheaper than court trials). They can cost several thousand dollars in order to have an arbitrator hear your case, especially if you were going with a credible organization such as the American Arbitration Association. Please review your agreement so that you are the one who picks the arbitrator, otherwise allow – where arbitration procedures so permit – for two arbitrators to be appointed, one by each party; in this case the two arbitrators so appointed will appoint third arbitrator – the chairman of the arbitration tribunal, in which case the award will be issued by the chairman. Remember that different countries have different rules so be sure to check with a local attorney.
A mediation/arbitration hybrid is a formal legal proceeding which uses both mediation and arbitration. The process will usually start with a meditation according to the procedure outlined above. If the mediator fails to bring the parties to a settlement, then the other one will take place. This hybrid solution is an excellent way to pressure the parties to reach an agreement through mediation because there is the added pressure of a binding decision if they find a solution. However, this solution can be rather costly because you have to pay both mediator fees and arbitration fees. With the hybrid, the arbitrator's decision will be binding and there will be no appeal.
Litigation is when parties bring an action before a court or administrative body. A legal dispute begins with a demand. The party will write a letter saying what they believe they're entitled to from the other party. Should that not resolve the dispute, then they would refer the dispute to the proper court. It is important to distinguish litigation from mediation or arbitration in the sense that any court hearings are public proceedings, whereas a mediation or arbitration will likely be a private event. Remember that each jurisdiction has different laws with respect to how litigation is conducted, so make sure to check with a local attorney.
If the judge decides that the claim is properly constituted, then the case will move forward and the parties will engage in discovery. This is the process by which the parties exchange documents and other information to investigate the legal dispute. Discovery can consist of depositions, medical examinations, requests for production, interrogatories, and requests for admission. Depositions, in particular, can be quite annoying to deal with because you will have to take time away from your business to attend the deposition. In these proceedings, the questions are under oath, which means that you cannot lie and the attorney may be able to ask about business information that you likely want to keep confidential.
When discovery is finished or coming to a close, the judge will set the case for a hearing. The parties may also be entitled to have the judge decide the case without a trial based on the evidence that was produced in discovery. Remember, all of this requires paying an attorney expensive hourly fees to attend court for you, which is why it may be advantageous to review some of the Starting Business arbitration and mediation agreements to avoid these costs.
If the judge believes there is still a dispute of the facts in the evidence produced in discovery, the case will go to trial. Remember, the parties may still reach a settlement even on the day of trial. If they do, the trial will likely be canceled. When the trial occurs each party will give an opening statement, call witnesses to testify, make motions, and give closing arguments. Depending on the type of lawsuit you have, the trial will take place in front of the judge--this is called a bench trial--or it will take place in front of the jury. For a trial by jury, the judge rules on the law and the jury decides the facts. If you have a business lawsuit against an individual, juries are typically more sympathetic to the other side because you are likely the one with more money. The jury will then read the verdict, and a judgment will be entered.
Unlike arbitration, if you do not agree with the trial court’s decision, you can file an appeal and have it decided by another court. This means you are still incurring additional attorney’s fees for your lawyer to file legal briefs with the appellate court. Appeals can take anywhere from eight months to several years to be decided. If you are successful, then you may have to go back to the trial court for additional hearings. Sometimes, you may be eligible to appeal the appellate court’s decision to your state’s supreme court. This can take many years and will cost you much more money. That is why you want to avoid these types of costs by reviewing our arbitration and mediation agreements so you can resolve your legal disputes without breaking the bank.