How to resolve a business dispute

Negotiation

In negotiation, the parties come together in direct discussions to resolve their disagreement. They meet or (have their lawyers meet) to negotiate a solution that best meets each other’s needs and interests.  If done early in the dispute, a negotiated agreement can be the quickest and least expensive way to resolve a business dispute.

Mediation

Mediation provides a more formal structure for negotiation in business disputes. It still allows both parties to maintain control over the process, rather than handing control over to an arbitrator or judge.  In some Canadian jurisdictions (such as in Toronto), mediation is a prerequisite to scheduling a trial in the litigation process.

If the parties cannot negotiate a settlement on their own, they can retain a mediator to help them find common ground. As a neutral third party, the mediator can help ease tension, advise both parties on the strength and weaknesses of their positions, and facilitate discussion.

The mediator does not decide the case or force a settlement. Both sides must be willing to accept the proposed settlement for the dispute to be resolved. This type of resolution rarely involves one hundred percent of what either side is seeking. Rather, it puts forward a solution that can be mutually satisfactory to both parties. If an agreement is reached, it is documented in writing, and all parties sign it, making it legally binding. If the parties are too far apart to reach a settlement, they can move on to arbitration or litigation.

Arbitration

In arbitration, both parties to a dispute select a neutral arbitrator to help them resolve the dispute privately (and confidentially). The arbitrator acts like a “private judge” who hears evidence, witness testimony, makes a decision, and potentially awards damages. In addition to damages, the successful party may also be awarded a portion (or all) of its legal and arbitration fees. The arbitrator’s decision is typically final and binding.

The parties have more control over the process in arbitration than the court process. They set the timeline, ground rules and shape the arbitration process.  It is less formal and quicker than scheduling a trial in court.

Litigation

Litigation is the most conventional form of adjudicating a dispute. It is a public court process for resolving cases. At the trial, all parties plead their case before the trial judge who hears evidence and makes a decision.

Litigation can be time-consuming and very expensive. The court process has numerous and often complex rigid steps and procedures for the entire process from launching the lawsuit to the trial date. Court calendars are notoriously backlogged. The entire process can take years before a trial is heard and can involve many procedural steps and disagreements along the way.

Arbitration and Litigation

In both arbitration and litigation, the results of the case may include either a dismissal or an award of some relief that a party may be seeking. This may include any of the following:

1. An award of damages which one side has to pay to the successful party based on breach of contract, negligence or breach of other legal obligation.
2. An award of damages based on a statutory obligation (such as franchise rescission).
3. Equitable remedies which may include specific performance (requiring a party in breach of contract to perform what they promised in the contract) or contract rescission (cancelling the entire contract and ordering a repayment of all losses to one side).

Conclusion

When faced with a business dispute, it is critical to approach the situation with a strategic mindset and consider the available methods for resolution. The four main methods discussed in this article are negotiation, mediation, arbitration, and litigation. Each method offers its own benefits and considerations, allowing businesses to choose the approach that best suits their needs and circumstances.

It is important to note that the choice of resolution method may vary depending on the specific circumstances of the dispute. In some cases, a combination of methods may be utilized. By consulting with an experienced commercial litigator early on, a business can gain valuable insights into its legal position and explore the most suitable path for resolving the dispute.

Ultimately, the key objective in resolving a business dispute is to reach a fair and mutually-agreeable solution that (where applicable) preserves relationships and protects the interests of all parties involved. By understanding the available options and selecting the most appropriate method, businesses can navigate through disputes effectively and minimize the potential negative impacts on their operations.

This article is provided for general information purposes only and is not intended to provide legal advice. Parties in a business dispute should obtain legal advice from a knowledgeable commercial lawyer.

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