Most people think of litigation when it comes to resolving breach of contract matters — but it’s important to be aware that other options exist. Alternative dispute resolution methods such as negotiation, arbitration, and mediation can help parties in a commercial conflict settle their disagreements outside the courtroom. In many cases, these processes can be much more efficient and cost-effective than having a judge or jury determine the outcome of a breach of contract case at trial.

What is Alternative Dispute Resolution?

Alternative dispute resolution refers to any non-adversarial and informal process of resolving conflicts outside the courtroom. Instead of litigating a case, the parties are empowered to work together to identify a solution and amicably settle the matter. In certain cases, a judge may encourage the parties to participate in ADR procedures before they proceed to trial.

Types of Alternative Dispute Resolution Used in Breach of Contract Cases

The first step any business owner should take if they have experienced a breach of contract is to try to resolve the matter without judicial intervention. Commonly referred to as “ADR,” alternative dispute resolution can help parties reach a resolution in a breach of contract case without the time or expense associated with litigation.

Although there may be situations where a case should be brought into court, many breaches of contract can be cured without resorting to a “win-at-all-costs” approach. ADR can be most useful in cases where the parties have an on-going business relationship that they wish to preserve. The three most common forms of alternative dispute resolution used to resolve business conflicts, including breaches of contract, include the following:

• Negotiation — Negotiation is always attempted first before resorting to any other method of resolving a dispute. Negotiations can consist of any form of communication that occurs directly between the parties without the assistance of a facilitator from the outside. Importantly, negotiation is private, efficient, and cost-effective.
• Mediation — In mediation, a neutral third party meets with the disputing parties to help them reach a mutually satisfactory settlement agreement. Mediation is an informal, flexible, private, and confidential process.
• Arbitration — While arbitration uses a neutral third party to settle a dispute, it is more formal than mediation and less formal than litigation. The arbitrator is selected by the parties to hear their arguments and evaluate the evidence to reach a determination. The process is like a mini-trial, and depending upon what the parties agree, the decision reached in arbitration may be either binding or non-binding.

The type of alternative dispute resolution used may depend upon the provisions in the contract. For instance, many contracts contain an arbitration or mediation clause that would require parties to participate in one of these processes before they can bring a lawsuit. If attempts at ADR have been unsuccessful, it may be necessary to proceed to litigation.

When Should Alternative Dispute Resolution Be Used to Resolve Breaches of Contract?

A breach of contract can interrupt business operations and impact a company’s bottom line. Significantly, one of the most crucial components to consider in determining whether a case should be brought into court is the amount of damages suffered — as well as those which would be recovered. If the damages are nominal, pursuing litigation may not be worth the time and expense. In such cases, ADR can be a better option.

ADR might also be the best method of settling a breach of contract if the parties hope to continue working together in the future. Parties can discuss their concerns and reach a decision focused on compromise. Since both parties are involved in the dispute resolution process, they are more likely to be satisfied with the result, which can help to keep a business relationship intact. In contrast with litigation, ADR can also keep business interruptions at a minimum.

In order for ADR to be effective, both parties must be willing to participate in the process and work together to reach a compromise. If this is possible, ADR can help business owners move forward much more quickly with settling their dispute. They can also help minimize the risk of reputational harm to their company.

There can be disadvantages to using certain forms of ADR in a breach of contract case. For example, with arbitration there is limited discovery — and depending upon whether an arbitration decision is binding or non-binding, the parties may have no other recourse to pursue. In contrast, the non-prevailing party in litigation may have a right to appeal if a procedural error was made. Additionally, both mediation and arbitration can still result in a substantial expense with no certainty that the matter will be resolved.

Contact an Experienced Illinois Business Attorney

A breached contract can cause damage to your business’s reputation and bottom line. If you are facing a breach of contract matter, it’s important to have a knowledgeable attorney by your side who can fight for your rights. Located in Rolling Meadows, Litico Law Group is dedicated to serving the legal needs of business owners in Illinois for a wide variety of matters, both in litigation and by utilizing alternative dispute resolution methods. We welcome you to contact us by filling out our online form or calling (847) 307-5942 to schedule a consultation to learn how we can assist you with reaching your business goals.