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Unformatted text preview: C HAPTER 4 D ISPUTE R ESOLUTION Objectives After studying this chapter, you should have an understanding of: how business activities may lead to legal disputes the options for resolving a legal dispute when and how alternative dispute resolution works the litigation process Learning Outcomes Understand how normal business activities can lead to legal disputes (page 71) Understand how a risk management plan can minimize the disruptive nature of legal disputes (page 71) Understand the difference between negotiation, mediation, arbitration, and litigation (pages 75, 78) Understand the legal process for litigation, mediation and arbitration (pages 79, 82) Understand the advantages and disadvantages of each method of solving disputes (page 91) Chapter Summary Any business activity bears the risk of a legal dispute. Since this is a normal risk of doing business, a risk management plan can help to identify potential legal problems and minimize their impact. Planning can help a business choose the best method to solve any dispute, with the goal of reaching an acceptable resolution. In many situations, the first step is to try to negotiate a solution. If the parties need the assistance of an unbiased, neutral party to facilitate communications, they may decide to hire a mediator. This outside person has no power to impose a settlement on the parties, but can help the parties reach an acceptable compromise. If negotiations break down, or if the parties skip this step, the parties may agree to submit their dispute to arbitration. This is an alternative method to court action. The parties must agree on the appointment of the arbitrator and they must bear all costs associated with the arbitration. However, arbitration is usually cheaper than court action because it is faster. The parties may also be attracted to arbitration because the proceedings and the decision are private. This may be important to businesses that may not want competitors to be aware of the nature of the dispute, or where the parties do not want to run the risk of creating an undesirable court precedent. If arbitration is not a viable method to solve the dispute, one party may sue the other, thereby initiating litigation. Consent of the other party is not required to start a lawsuit, as it is for mediation or arbitration. Lawsuits are complex, expensive, time-consuming, and 2008 BY N ELSON , A DIVISION OF T HOMSON N ELSON L TD . PART 1: THE LEGAL ENVIRONMENT OF BUSINESS stressful. However, where it is important to one party to have a solution imposed on the other party by a judge, litigation may be the only choice. The role of the judge is not to compromise or help the parties reach a mutually acceptable solution, but to decide on a winner and a loser in the case. The winner is entitled to collect money from the loser, if the loser has the ability to pay....
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