Negotiation vs. Mediation for Business Partnership Disputes

When a business partnership is formed, those involved are almost always optimistic that the venture will be successful. Much like a marriage, the parties tend to overlook the other’s faults at first, instead choosing to focus on the benefits the partnership has to offer.

After being in business for a while, things inevitably start to change. Conflicts develop between partners, and sometimes a dispute escalates to the point where it threatens the stability of the company.

When disputes arise, there are various methods that can be used to resolve them. Two of the most popular are negotiation and mediation. There are advantages to each of these approaches, and both can be used to successfully resolve conflicts among business partners.

Here is a closer look and each of these forms of dispute resolution:

Negotiation

When business partners are at odds, they can try to negotiate a workable settlement. Negotiation is a flexible and fairly unstructured process; participants can negotiate directly, through their attorneys, and/or with the help of other outside parties. There are no set procedures that must be followed, and you can negotiate in virtually any setting (e.g., in the conference room, your office, a restaurant, or any other location).

Negotiation occurs every day in the corporate world. Most partners also negotiate with each other on a regular basis to determine how to handle various issues that impact the business. When a dispute arises, negotiation is generally the first method used to attempt a resolution.

Some of the main characteristics of negotiation include:

  • Flexible, informal, and unstructured process;
  • The process is private, confidential, and voluntary;
  • The process can be fast and inexpensive;
  • The participants are in control of the process;
  • The process can lead to a mutually agreeable resolution.

Mediation

Business partnership mediation has many of the same characteristics as negotiation. In fact, mediation is a more structured type of negotiation that is facilitated by a neutral, third-party mediator. Like direct negotiation, the process is flexible and informal, and it is often used by disputing partners when they are unable to come to an agreement on their own.

During the mediation process, the participants and the mediator meet together to discuss the issues that are causing the conflict. The mediator guides the discussion between the parties toward an agreement that all parties will be happy with. The process is private and confidential, so participants are able to freely express their views and opinions.

Though an impartial mediator is in control of the process, the participants still control the outcome. The mediator will not impose a solution on anyone; the participants must be in full agreement for a settlement to be reached. If no agreement can be negotiated, the parties are free to pursue other forms of dispute resolution such as arbitration or litigation.

Partners may involve their attorneys at any time during the mediation process. They may choose to consult with attorneys to prepare for mediation sessions, and at the end of the process, it may be necessary for an attorney to draft and/or review an agreement to ensure that it is legally enforceable. For mediation to be successful, partners should agree to remain calm, not talk over each other, and be open to considering alternative viewpoints.

Some of the main characteristics of mediation include:

  • Flexible and informal process;
  • The process is voluntary, private, and confidential;
  • Faster and far less costly than litigation;
  • Participants are in control of the outcome;
  • The process can lead to a mutually agreeable and legally enforceable agreement.

Why Mediation? 

When direct negotiations break down, mediation is the next best option. Oftentimes, an impartial mediator, particularly one with extensive business experience, can bring a fresh perspective from someone on the outside. This can give partners creative options and customized solutions they may have never previously considered or even been aware of. And because the participants are the ones who ultimately create the agreement, they are much more likely to honor its terms and conditions.