When a consumer and trader have a dispute that they cannot resolve between them, or when two traders disagree, they can use Alternative Dispute Resolution (ADR). This achieves a simpler, cheaper and quicker outcome than going to court.
Often in both business to business (B2B) contracts, and almost always in business to consumer contracts (B2C), ADR terms will be included.
What is ADR?
The most common types of ADR are mediation (where someone independent helps the disagreeing parties to reach a mutually acceptable position), and arbitration, (where someone independent considers the facts and takes a decision that is often binding on one or both the disagreeing parties.).
Is it mandatory to include it in contracts?
Under UK law, almost all businesses which sell directly to consumers are required to point those consumers to a certified ADR scheme in the event of them not being able to agree on the outcome of a disputed matter.
Businesses selling to other businesses are not obliged to do this.
If you don't know which one to use, here are a list of certified ADR providers.
If the ADR provider deems the dispute as frivolous or low value, they’re entitled to reject it. They may also refuse the dispute if the consumer and trader didn't attempt to resolve the dispute themselves, or if the dispute has already been considered by another ADR provider or a court.
The ADR process
1. The buyer raises the dispute with the ADR provider the trader recommended. In order for an ADR provider to accept the dispute, the following must be correct:
a. The buyer tried to contact the trader to settle the dispute themselves
b. The buyer sent the complaint to the ADR provider within a set amount of time, which can vary, but should be more than a year after they complained to the trader
c. The dispute hasn't before been considered by another ADR provider or a court
d. The dispute isn't frivolous or vexatious
e. The value of the claim meets the ADR provider's set monetary amount
f. The dispute wouldn't cause a negative impact on the ADR provider
2. Both parties decide on what process they'd like the ADR provider should use:
a. Adjudication (can assess several disputes at once, less formal than arbitration, decisions must be made within 28 days, but they’re not legally binding)
b. Arbitration (can assess only one dispute at a time, but decisions are more legally binding than adjudication)
c. Mediation/conciliation, negotiation (instead of ruling in favour of one party, this instead finds a solution that works for both)
d. Ombudsman schemes (where an independent party looks at evidence to make an unbiased ruling. If the decision is not agreed with, a party may appeal, but the court will take the ombudsman’s decision into account)
3. The buyer and trader must both send evidence of the dispute as required by the ADR provider
4. A decision or recommendation must be produced within 90 days of the ADR provider receiving all documents relevant to the dispute, unless the dispute is exceptionally complex
If the dispute is regarding an online sale, the European Commission's Online Dispute Resolution (ODR) is used too.
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