Legal arrangements can be complicated. Whether the situation involves a separation of assets, business purchase, tenancy, sale of goods, or employment, disputes may arise if both parties do not agree or if one party violates the terms of an agreement.

In most contracts, the parties will decide how conflicts should be resolved if and when misunderstandings arise, including a breach to the contract itself.

From negotiation to lawsuits, here is an overview of the four main types of dispute resolution and how each one works.


Negotiation is the most basic form of dispute resolution and it tends to be the first step for those trying to come to terms in an agreement.

How Negotiation Works

Negotiation is when both parties meet to discuss their issues and come to a resolution on their own about a disagreement. The individuals (or businesses) involved control the process and outcome.


If negotiation is not possible, the disputing parties will often introduce a third party in what is known as mediation.

Mediation helps two parties reach a compromise through use of a mediator. It’s not the mediator who decides the outcome but they do facilitate the negotiation process and let the disputing parties decide the conclusion for themselves.

How Mediation Works

Mediation usually starts with hiring a mediator and how it plays out depends highly on your situation and the person who will be conducting the mediation process.

Typically both parties meet in a neutral location, where each individual will give their side of the story. The session is completely private and confidential. From there, it is up to the mediator to decide how they would like to move forward. Sometimes the parties will then be separated to make their presentation on the case. A solution is then attempted to be reached by the mediator going back and forth between the two parties separately or together.

Mediation is an inexpensive and amicable way to reach common ground between two disputing parties. It allows the group to make a mutual decision with the aid of a neutral third party who is trained in mediating disputes.


Arbitration is an alternative dispute resolution (ADR) used outside of court with a third party, known as an arbitrator, who decides the final outcome.

How Arbitration Works

Arbitration works by both parties agreeing to submit the dispute to an arbitrator, whereby he or she makes the final call on what to do.

Like mediation, the whole process is confidential. The main difference between mediation and arbitration is that the resolution or decision lies in the hands of the arbitrator.

Once the decision is made, it is binding. The arbitrator is expected to be neutral.

Sometimes, the disputing parties will try mediation as a first resort, and if they cannot reach a consensus, they will turn to arbitration to resolve a dispute.

Litigation (Lawsuit)

Litigation involves taking a dispute to court, where both parties present their case to a judge in an attempt to reach a resolution or settlement.

How Litigation Works

During a lawsuit, a judge will listen to each party’s argument and interpret the laws as applied to the situation. He or she will make a judgment and the resulting decision is binding.

Lawsuits, by nature, can take time and follow a formal procedure that is open to the public. Instead of coming to a consensus, there is a clear win and lose situation at stake. Taking a dispute to court can be expensive and may not provide the best solution for both parties.

However, in some cases, it may be the only option for two parties where no mutual understanding can be reached.

Other Forms of Dispute Resolution

The most common forms of resolving a legal dispute are listed above, but there are other ways two parties can come to a consensus during a disagreement.

Conciliation: Another alternative dispute resolution method whereby a neutral third party conciliator will facilitate an agreement but cannot make a binding agreement on behalf of the parties. Conciliation is typically used by employers, unions, or government officials to solve problems before protests, strikes or lock outs occur.

Collaborative law: Used in divorces or separations, collaborative law attempts to reach an understanding between two spouses with the help of lawyers and other professionals. Collaborative law has the goal of providing the best outcome or settlement for all parties and their children, if any, without taking the case to court. It is a collaborative and cost-efficient form of dispute resolution.

Other methods of conflict resolution include diplomacy, peacekeeping, restorative justice, group conferences, case or neutral evaluation and more.

Resolving Conflict

The type of dispute resolution for your legal conundrum depends on your situation and resources. It is better if disputes can be resolved at a ground level by the participating parties before taking the case to a higher court, not only for financial reasons but also for the control, ease and mutual benefits of deciding an outcome together.

If you are ever unsure about which course of action to take regarding a legal dispute, consult a lawyer and they will be able to provide proper guidance on your situation.

Posted by Kristy DeSmit

Kristy is a blogger, Twitter enthusiast, and company legalese interpreter.