Alternative Forms of Dispute Resolution: Negotiation, Mediation & Arbitration

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  • 0:06 Conflict Resolution Processes
  • 0:57 Negotiations
  • 1:51 Mediation
  • 4:01 Arbitration
  • 5:22 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

In the eyes of the law, there are several ways a dispute can be settled. Some disputes can simply be negotiated to a win-win outcome. Others may require a third party to assist in coming up with solutions to remedy a situation.

Conflict Resolution Processes

Once, lovebirds Harold and Melba married and had a few kids. After several years of bickering over laundry, bills and Harold's weekly poker game, they decided to call it quits. However, during the marriage, they accumulated quite a few assets, like a house, a boat and several vintage cars. Unable to settle on the splitting of their stuff, the duo decided on dispute resolution.

Dispute resolution is a process of bringing in a third party to help sort out the situation through communication and negotiation. There are several types of resolutions, and they are mainly used in employment and legal disputes.

The three main forms of dispute resolution we will focus on are:

  • Negotiations
  • Mediation
  • Arbitration

Now, we will explore each form of dispute resolution in detail.


Negotiations occur when two parties set forth the type of remedy each desires, and try to reach some sort of an agreement that satisfies everyone involved. In the best-case scenario, negotiations are done between the parties and both come to a happy agreement. The first step towards dissolving Harold and Melba's assets may be negotiations.

This is how a typical negotiation may look:

  1. Each party will prepare a list of what each party wants (house, boat, car, money)
  2. Each will decide upon a timeframe to acquire the assets, and
  3. Each will have an alternative or other options for the settlement of assets

Once agreement has been reached, the parties will create a written statement to reflect the terms of the negotiated assets. While Harold and Melba tried very hard to divide the dowry fairly, each wanted what the other person wanted. It was a mess!


It is important to note that each state court functions differently, but in New York, Harold and Melba would be referred to mediation. Mediation is an alternate form of resolution that involves assigning a neutral third party to assist the couple in coming to a fair and equitable agreement on the distribution of assets.

Mediation is not always voluntary. Sometimes the court will order mediation, especially if the divorce dispute involves child support, alimony or child custody. Not to confuse things, remember negotiations and mediation are not solely used for divorce situations. Both alternative resolutions are used for employment issues as well. For example, at work, employers and employees use collective bargaining to settle disputes. This is negotiations between the employer and the employee to settle issues like work conditions, salaries and benefits.

To clarify, collective bargaining is usually done when employees are represented by a union, or a collective group of employees with a common interest. Mediation is also successful in resolving employee disputes. It is beneficial for a company to go this route, because the sky-high cost of hiring legal professionals can crush a company financially.

Let's say Jolie was terminated without cause from her position at Westwood Dynamics, Inc. Jolie can do a few things: She can walk away with only her potted plant and her ego, she can sue for millions of dollars, or she and her former employer can enter into mediation to come to a mutually satisfying resolution.

What will happen is:

  1. Both parties will identify the issues,
  2. Propose possible options for resolution,
  3. Evaluate each option for fairness,
  4. Choose the best option, and
  5. Prepare a written agreement.

Jolie wanted to sue Westwood for everything they have. Westwood wanted Jolie to just go away. The mediator wanted to find a happy medium. In Jolie's case, the outcome may be that she will receive a severance package, including a monetary settlement and a letter of recommendation.


Arbitration works a little differently, because this process involves both parties agreeing to allow a third party not only to mediate, but to come to a final decision on the issues. To say it a different way, in arbitration, the parties agree to allow a neutral person to listen to, evaluate and decide on the best possible solution to their problem. Both parties decide on the arbitrator, or the non-biased party, and after he hears testimony from both sides, a decision is made.

This process is commonly used to settle automobile accident claims because it saves money and time. Court costs, attorney fees and time away from the office can be costly. An arbitrator will charge a fee for services, and the resolution happens quickly. This fee is usually much more economical than using a lawyer.

Some of the decisions an arbitrator will make in an auto accident dispute are:

  • Who recovers money from whom?
  • How much money will be recovered?

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