Contractual disputes are disputes that occur between parties who have entered into a legally binding agreement. Contractual disputes are common in business and can arise for a variety of reasons, including contract breach, failure to perform contractual obligations, and disagreements over contract terms.
When contractual disagreements arise, the parties have a number of options for resolving them. Litigation, which involves filing a lawsuit in court, is one of the most common methods. Litigation is often costly and time-consuming, and it can result in an adversarial process that harms the parties’ relationship. For resolving contractual disputes, alternative dispute resolution (ADR) mechanisms such as mediation and arbitration are becoming increasingly popular.
ADR is a method of resolving disputes that do not involve the traditional court system, such as negotiation, mediation, or arbitration. It can be a more efficient, less formal, and more adaptable method of resolving disputes. ADR also gives the parties more control over the outcome because they have a greater say in the decision-making process. Over the last several decades, there has been a steady decline in the number of civil cases tried in the federal courts of the United States. Approximately 11.5% of federal civil cases went to trial in 1962. According to data from the Administrative Office of the United States, by 2016, that figure had dropped to just 0.2% of all cases.
According to experts, the percentage of civil cases that reach trial in federal courts is currently around 1%, a significant decrease from the mid-twentieth century. This trend has been influenced by a number of factors. The growing popularity of alternative dispute resolution (ADR) methods is one of the primary reasons for the decline in civil trials. According to a 2019 report published by the National Center for State Courts, alternative dispute resolution (ADR) is widely used in the United States, with the vast majority of civil cases being settled using ADR methods.
The report, titled “Examining the Work of State Courts: An Analysis of 2017 State Court Caseloads,” discovered that over 95% of civil cases were resolved through ADR processes in the 44 states that reported data on ADR usage. This includes personal injury, contractual disputes, and employment law issues. The report notes that the use of ADR has grown significantly over the last several decades, and attributes this growth to a variety of factors, including rising litigation costs and delays, a desire for more efficient and effective dispute-resolution processes, and the growing popularity of ADR among legal professionals and the general public.
Depending on the type of ADR used, ADR, or Alternative Dispute Resolution, can be handled by a variety of individuals or organizations. Mediation, a non-binding process in which a neutral third party assists the parties in reaching an agreement, can be handled by trained mediators who may be lawyers, retired judges, or other professionals with specialized mediation training. Arbitration, a more formal process in which a neutral third party (the arbitrator) makes a binding decision on the dispute after hearing evidence, can also be handled by trained arbitrators, who could be lawyers, retired judges, or other professionals with specialized arbitration training. ADR may be administered in some cases by an ADR provider, such as the American Arbitration Association or JAMS, which offers a variety of ADR services, such as mediation, arbitration, and other forms of ADR. These service providers frequently have panels of experienced mediators and arbitrators who are chosen for their expertise and qualifications.
Regardless, it is important to note that avoiding contractual disputes is often preferable to resolving them. Parties can accomplish this by ensuring that the contract’s terms are clear and unambiguous, that all parties understand their contractual obligations, and that the contract is properly executed and documented.