BACKGROUND:
The legal system is dysfunctional: time consuming and grossly expensive. Alternatives to the judicial system have arisen: Arbitration and Mediation.

MEDIATION allows the parties to meet with a neutral adviser who can listen to each side and try to craft a mutually agreeable solution.

If you do not like the Mediator's suggestions, they are not binding at all.

ARBITRATION is a privately conducted trial to resolve a dispute. The legal system is so expensive and backlogged that many people prefer to hire a "rent a judge" to reach a verdict quickly in a (hopefully) less expensive procedure. A winner is declared.

Arbitration can be binding (in which case, there is NO appeal), or non-binding, in which case it is at best a reality check which may cause one party to realize that his case has problems.

If we assume a general rule that in today's market, Buyers are more litigious and arbitration is cheaper, requiring arbitration makes it easier for the Buyer to fight. A case which might be cost- prohibitive to litigate might be well worth the less expensive alternative of arbitration.

Therefore, our general advice to clients is that Buyers should demand arbitration clauses in contracts; Sellers should refuse.

See ADR
See Contract Guide
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