3. What are the advantages of using ADR to resolve disputes?
The effective use of ADR offers several distinct advantages:
• Costs – ADR may reduce the costs associated with litigation for the disputing parties. This is probably the most common reason for including an ADR clause in a contract or agreeing separately to submit a dispute to ADR.
• No Jury – Businesses generally prefer ADR to litigation because it avoids allowing a jury to decide a dispute. ADR, unlike a jury trial, generally involves the use of one or more knowledgeable professionals to either decide or assist in resolving the dispute. This is far more practical than letting a random group of jurors resolve the issue.
• Privacy – Another reason to use ADR is that it is a private process; whereas, litigation and court records are open to the public. Individuals concerned with public knowledge of the dispute harming the company’s brand or reputation strongly prefer the use of ADR to resolve disputes.
• Business Relationship – ADR can preserve the on-going business relationship between the parties, where litigation often destroys the relationship.
• Discussion: Can you think of any other benefits to ADR over litigation? Should businesses include ADR clauses in all contracts? Should individuals dealing with businesses agree to an ADR clause or should they attempt to eliminate ADR clauses? Why?
• Practice Question: Ryan runs a consulting business. All of his clients enter into an agreement to mediate any disputes arising under the agreement. If the mediation does not work, the client agrees to submit the dispute to arbitration. What are the advantages to the business of pursuing all available ADR methods rather than pursuing litigation?