It’s important to work closely with your attorney to develop a strategy for moving forward when a contract dispute is in play. Each dispute is unique, just as most contracts are unique, so no one set of tactics can work for all companies. No matter which method you choose to resolve a conflict, negotiation, mediation, and arbitration are only effective because of the shadow cast by the threat of litigation. Here are your options:
Ignoring a clear breach of contract is an option. While it helps you avoid confrontation, it’s not a good business or legal strategy. Likewise, conceding to the demands of other side without getting any remedy in return is also a poor choice.
You can negotiate a change to the contract. Your business attorney can help you clearly define your goals for a positive outcome and be honest with you about whether or not these goals are realistic. Contract negotiation can be particularly effective when each side has a different understanding of a specific part of the contract. They can then reach common ground and agree to amend the contract to remove vague language or clarify intent. Negotiation can also be a good strategy when the other side is unable to perform their duties under the contract but wants to save the deal rather than litigate for damages.
Mediation can resolve disputes when both sides are unable to reach an agreement. You can hire one mediator to mutually help both parties. This individual should be an outside third party, and not the attorney of one party or the other. Sometimes if neither can agree upon a mediator, one will be appointed to them by a judge to help resolve differences and avoid litigation. The biggest advantage of using a mediator is that it remains private as there is no public record of the dispute. It’s also less expensive than litigation and can lead to more creative solutions not available from an arbitrator or judge.
Arbitration is faster and less expensive than going to court. While it looks similar to the court system, arbitration involves a third party who acts as the decision maker. Arbitration can happen in person or remotely via phone conference, which can be a good option for companies battling companies based in other states. The rules of evidence are often looser in arbitration and arbitrators can work on a much faster timeline than judges—often cutting a dispute that could take years to resolve in the courtroom to weeks or months.
There are two types of arbitration—non-binding and binding. Simply put, in non-binding arbitration, either side can reject the decision of the arbitrator and proceed to court. In binding arbitration, both sides agree to waive their rights to file a lawsuit. They agree to accept and abide by the decision of the arbitrator and create a separate contract regarding the new terms set forth by the arbitrator.
Litigation is often the last resort for dispute resolution. But remember, just because a lawsuit is filed, that doesn’t guarantee the case will go to trial. Most are resolved before ever stepping foot into a courtroom, but it’s still a lengthy, expensive process. Sometimes this involves a discovery process requiring both sides to turn over documents and undergo depositions, and the court will urge them to negotiate a settlement. The court may also strongly suggest or even order that both sides go to mediation before going to trial.
