You Can Include ADR in Your Contracts, But Should You?

Alternative dispute resolution, or ADR, includes things like mediation and arbitration, which are conducted in an effort to try to resolve disputes outside of court, or before a full blown trial. ADR can be a cost effective method of resolving disputes, without the time, cost, or necessity of extended business litigation.

You can include ADR in all of your business agreements, if the parties agree, and can even require the parties to attend ADR, before any lawsuit is filed. But should you?

Will it Help or Hurt?

One big issue that businesses face is that they don’t have a crystal ball—they don’t know beforehand whether they will be in a situation where an ADR provision in their agreement would tend to hurt, or impair them.

The big benefit to ADR, is a chance to resolve a case before it blows up into more expensive and protracted litigation. But there are drawbacks to including ADR as well: you have to abide by the ADR provisions the same way the other side to the contract has to do.

Time Aspects of ADR

ADR can slow down a legal process—if you feel like you have been wronged, and want quick and immediate legal action, or if you just want a court to resolve a problem that you are having, you won’t be able to just sue—you will have to go to ADR first.

And while you could resolve the matter in ADR effectively and efficiently, if the matter doesn’t resolve, you still have to file a lawsuit, and the time you spent in mediation or arbitration or whatever method of ADR you chose, has now passed, and did not generate any meaningful solution to you (and in fact, may have just increased expenses and costs).

Just Bluffing?

Presuit ADR (that is requiring ADR before a lawsuit can be filed), also has another disadvantage. Because it is conducted before a lawsuit is filed, the parties may not have much evidence collected to show during the ADR session.

That means that there may be a lot of puffery, unsubstantiated statements, or outright bluffing. Without any evidence collected through discovery, it may be impossible to know whether you have a good or strong case, and thus, you won’t have much to convince the other side to resolve the case in ADR.

Early Evaluation

There are good things about ADR as well. Namely, you will have the chance to evaluate claims, before they go to court. You can resolve those that may have some merit, and reject those that you feel are very defensible. In the event you have tangible evidence that the other side has a weak claim or defense, you will have the chance to show what you have, early on in the process, and perhaps convince the other side to “stand down.”

Pre-suit ADR can also allow you the chance to avoid lawsuits that come “out of the blue,” allowing you to find counsel with enough time before a case is filed.

And if you are the one having to pay money, you may be able to offer more at ADR, before you’ve spent more money on litigation later on.

Every business and business problem is unique. Let us help you with yours. Call the West Palm Beach business lawyers at The Law Offices of Larry E. Bray today for help with your commercial or business litigation problem.

Sources:

btmediation.com/advantages-of-alternative-dispute-resolution/

hbr.org/1994/05/alternative-dispute-resolution-why-it-doesnt-work-and-why-it-does