Four Methods for Settling Common Business Disputes

Settling Common Business Disputes

Disputes are common in the business world and finding efficient methods with which to settle these disputes is essential.  When disputes arise between businesses and their partners, vendors and customers, there are four options for resolving the problem.  The better understood these are by business owners, the greater the likelihood that the disputes will be resolved in the best way possible.

What are the four options for setting business disputes?

Direct Negotiation

This is the least expensive method for settling disputes.  It is a good starting point, but might not be the best option in the long run.  It is important that business owners know specifically what they want to achieve through negotiation and that they are able to see the issue from the other person’s perspective.  It requires negotiators be able to observe, listen and ask productive questions.  Without strong communication skills, a negotiation will not be successful.


The second option, mediation, is similar to direct negotiation, but utilizes a neutral third party that facilitates the discussion.  There is less need for the business owner to possess the strong communication skills required in direct negotiation because the mediator guides the process.  The goal of mediation is to find a resolution that works for both parties without settling on a winner or loser.  The mediator has no decision-making authority, but helps both sides of the dispute reach a mutually beneficial outcome.


Arbitration is often compared to mediation, but is different in many ways.  In arbitration, a neutral arbitrator hears both sides of a dispute and levies a decision which might be legally binding for one or both parties involved.  Arbitration is usually more expensive and time-consuming than mediation and focuses on creating a winner and a loser.  Many businesses understand the advantages of arbitration and create arbitration clauses in contracts in order to avoid taking disputes to court.


The final option for resolving a business dispute is litigation.  It is the ultimate win-lose scenario and all but guarantees someone will walk away from the dispute unhappy with the outcome.  This occurs when disputing parties take an issue to court and allow a judge to determine the outcome.  Litigation is the most time-consuming and expensive of the four options and is often seen as a last resort for settling a dispute.  Though there is a guaranteed resolution, it pits one side against the other and will likely destroy the likelihood of a relationship once the matter is settled.

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