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February 5, 2022

Benefits of Alternative Dispute Resolution vs. Litigation

Simply put, court cases are expensive and time-consuming. Alternative dispute resolution (ADR) processes are more efficient and cost-effective methods for solving a legal problem out of court, instead of litigation. Litigating minor or major disputes in court is a very slow process that comes with high costs. This is where alternative dispute resolution can step in and make a difference to help all parties involved reach a settlement they can agree to.

This article will explain the numerous benefits of choosing ADR, how to pay for ADR and who pays for ADR once an agreement or settlement is reached.

Benefits of Choosing Alternative Dispute Resolution

Alternative dispute resolution refers to the following legal methods: mediation, conciliation, arbitration, or negotiation.

Choosing ADR could lead to lower legal fees, quicker resolution times, and the opportunity to save relationships amongst the involved parties. Here are the benefits for parties to choose any of the above methods in lieu of litigation:

  • Faster: Dispute resolution moves quicker than litigation.
  • Low-Cost: The fees associated are significantly cheaper than court costs and attorney fees.
  • Confidentiality: While the results and outcome is public record, the conflict resolution process, session, and overall experience is confidential.
  • Preserves Relationships: Alternative dispute resolution showcases that the parties involved want to solve the issue at hand. These methods allow for an exchange of ideas and communication that can maintain positive relationships while resolving the conflict.
  • Informal: A less formal legal process tends to increase engagement and willingness amongst involved parties in order to reach an agreement.

Paying for Alternative Dispute Resolution

Dispute resolution costs in most cases are a direct cost to the plaintiff, even if it was ordered by the court. These costs are not the same as the costs associated with the settlement amount, which are usually split between the plaintiff, the attorney, and any lien holders.

There are various ways to pay for mediation or arbitration to keep it affordable and low-cost compared to litigation:

  • Flat-fee/All-Inclusive: This is the most ideal way to pay. This option typically includes all work and services provided for parties involved, from beginning to end. The party expected to pay these costs is relieved of any additional billing statements and this option allows for time flexibility on reaching an agreement.
  • Billable/By-the-Hour: With this option, ADR professionals will charge by the hour. If involved parties are on a budget regarding dispute costs, they should be cautious of any hand-holding during the resolution process because it can get costly.
  • Pay As You Go/Payment Plan: This is another option that helps keep costs down when executing a dispute case. Depending on how many sessions, it could be a mix of paying a flat fee and billable hours. In the beginning you’ll pay for an initial consultation, then pay for each resolution session. After that, there may be other associated fees to complete the settlement like the memorandum of understanding, a divorce or employment agreement, or filing service charge.
  • Retainer: This payment option is a required set amount of money the initiating party or plaintiff pays up front to the ADR professional in order to start work on a case. Often used in conjunction with billable hours, costs will be drawn from the retainer. An additional payment may be required once a retainer is complete or deliverable is finished.

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Who Pays for Alternative Dispute Resolution

Before accepting dispute resolution as your method of choice, unless it was ordered by the court, parties should address the issue of costs and who will pay. Sometimes, the costs or potential settlement in some dispute cases may be so small that a plaintiff won’t agree to mediation or arbitration costs won’t reach what will need to be paid. However, there should never be any built-in expectation that the other party will pay the costs.

Fourth Party – The Mobile App for Busy ADR Professionals

When it comes to choosing alternative dispute resolution methods to conclude a case, the Fourth Party app is a safe and secure tool to make sure ADR professionals can help parties resolve conflict faster.

If you’re a busy negotiator or ADR professional looking to maximize your time, money, and client relationships, Fourth Party is the answer. Our intuitive app is the solution for on-the-move arbitration, mediation, and conflict resolution professionals to manage tasks, streamline negotiations, and track results – all in one place.

Click here to book a demo with us at Fourth Party. We look forward to getting to know you and doing our part to improve the dispute resolution process.