Louisiana Contractors License Practice Exam

What is the main difference between arbitration and mediation?

1. Mediation uses a third party to make binding decisions; arbitration does not.

2. Arbitration involves a third party making a decision; mediation involves facilitation.

3. Mediation is always more formal than arbitration.

4. Arbitration is less costly than mediation.

The correct answer is: Arbitration involves a third party making a decision; mediation involves facilitation.

The primary distinction between arbitration and mediation lies in the role of the third party involved in each process. In arbitration, a neutral third-party arbitrator is engaged to hear both sides of a dispute and then make a binding decision that the parties are obligated to follow. This process is similar to a court proceeding but usually less formal. The arbitrator's decision is final and legally enforceable, which means the parties relinquish some control over the outcome of the dispute. In contrast, mediation focuses on facilitating a discussion between the parties with the help of a mediator, whose role is to assist in communication and negotiation rather than to make decisions. The mediator does not impose a solution; instead, they help the parties explore options and potentially reach a mutually agreeable resolution. This collaborative approach often allows for more flexibility and can preserve the relationship between the parties, as they maintain control over the final outcome. The other options do not accurately capture the core differences between these two conflict resolution methods. For instance, the idea that mediation is always more formal than arbitration misunderstands the nature of mediation, which is typically a less formal and more flexible process. Additionally, it's not necessarily true that arbitration is less costly than mediation; this can vary depending on the specifics of the dispute and the