Many contracts include provisions for alternative dispute
resolution mechanisms — ways to resolve conflicts without
going to court. There are two common forms of alternative dispute
resolution: mediation and arbitration.
Mediation is a process in which the disputing parties ask a
neutral third person to help negotiate and recommend a settlement.
The mediator's efforts and his or her recommendations are not
binding on the participants or enforceable by a court. Arbitration,
on the other hand, is an agreement to bypass a court action and
submit a dispute to the binding decision of an arbitrator or a
panel of arbitrators.
The key difference is that mediators negotiate and make
recommendations in an informal setting, while arbitrators perform a
judicial function and, at the end of a more formal hearing, make a
binding ruling that will be enforced, if necessary, by a court of
law.
