Contract Disputes: The Role of ADR

Article excerpt

The function of law may be described as twofold: first, to regulate the affairs of persons (persons include corporations, societies, individuals, and government); second, to establish within the community a level of moral conduct. The success of law may to a greater degree be based on the acceptance by the community of these regulations and the level of conduct maintained in order to resolve disputes.

To some degree, there has been a shift within community expectations with respect to the method by which conflicts are resolved. Parties seem to have a greater desire to see their disputes resolved rather than have their day in court. This concept is not new. One form of alternative dispute resolution, namely arbitration, has been around for centuries. In fact, recourse to the arbitration process has been common practice in England since the middle ages and was codified in 1698.1 Arbitration has been defined in Halsbury as:

[T]he reference of dispute or difference between not less than two parties for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction.2

ADR stands for alternative dispute resolution-meaning an alternative to the public court system. I prefer my colleague John Sanderson Q.C.'s interpretation, namely "appropriate dispute resolution," thereby leaving within the arsenal of dispute resolution systems the use of courts for those cases which may require a principle to be established, public vindication, or the infringement of a legal right.

Some years ago a Canadian publication, The Lawyers Weekly, set out the pros and cons of various dispute resolution methods. I reproduce this reference with certain modifications in Fig. 1 (on page 52).

Chief Justice Warren E. Burger said:

A common thread pervades all courtroom contests: Lawyers are natural competitors, and once litigation begins they strive mightily to win using every tactic available. Business executives are also competitors, and when they are in litigation, they often transfer their normal productive and constructive drives into the adversary contest. Commercial litigation takes business executives and their staffs away from the creative paths of development and production and often inflicts more wear and tear on them than the most difficult business problems.... The plaintive cry of many frustrated litigants echoes what Learned Hand implied: "There must be a better way."

Appropriate dispute resolution can take many forms. Basically the intervention of a third party making the decision is at the extreme end of appropriate dispute resolution; it is commonly called arbitration.

Other forms of dispute resolution include:



Early Neutral Evaluation





Rights-Based Mediation

Interest-Based Mediation

Neutral-Based Mediation

The latter two forms have recently been introduced as methods for resolving disputes for selfregulating bodies.

Generally, ADR may be classified into three major areas:

1. Negotiation.

2. Mediation.

3. Adjudication.

This article addresses mediation and adjudication.

The major difference between arbitration and the other forms of ADR is that arbitration imposes a binding decision upon the parties-the other forms require the parties themselves to come to a resolution of the dispute with the assistance of the third party.

A simple comparison between adjudication (arbitration) and interest-based mediation illustrates the flexibility of one process versus the rigidity of the other.


1. Looks to the past.

2. Focuses on facts.

3. Seeks to establish fault/liability.

4. Appoints winners and losers.

5. Is dominated by lawyers.

Interest-based mediation (as opposed to rights-based mediation):

1. …