Utah General Contractors - Business and Law Practice Exam

Which term refers to the legal resolution process agreed upon in a contract?

1. Litigation

2. Negotiation

3. Arbitration

4. Mediation

The correct answer is: Arbitration

The term that refers to the legal resolution process agreed upon in a contract is arbitration. This is a process where the parties involved in a dispute submit their issues to a neutral third party, known as an arbitrator, who makes a binding decision based on the evidence and arguments presented. Arbitration is often outlined in contracts as a preferred method of resolving disputes outside of the court system, offering a more streamlined and less formal approach than litigation. In contrast, litigation is the process of taking legal action through the courts, which can be more time-consuming and expensive. Negotiation refers to discussions aimed at reaching an agreement between parties but does not involve any formal resolution mechanism. Mediation involves a mediator who facilitates a discussion between the parties in hopes of reaching a voluntary agreement, but the mediator does not make a binding decision like an arbitrator does. Thus, arbitration stands out as the method specifically agreed upon in contracts for resolving disputes effectively and efficiently.