Michigan Residential Builders License Practice Test

Which method of alternative dispute resolution offers a binding settlement with no appeal process?

1. Mediation

2. Facilitation

3. Arbitration

4. Negotiation

The correct answer is: Arbitration

Arbitration is a method of alternative dispute resolution where an impartial third party, known as the arbitrator, is appointed to hear both sides of a dispute and make a binding decision. This process is similar to a court trial but is generally less formal and faster. One of the key features of arbitration is that the decision made by the arbitrator is final and binding, meaning that the parties involved cannot appeal the decision in a court. This binding nature is designed to provide a conclusive resolution to disputes, allowing the parties to move forward without the uncertainty of further litigation or appeals. In contrast, mediation and facilitation are both processes aimed at helping the parties reach a mutually acceptable resolution, but neither of these processes results in a binding decision. Mediation involves a mediator facilitating discussions between the parties, while facilitation is a more general process to improve communication and resolve conflicts without necessarily imposing a decision. Negotiation, similar to mediation, involves direct discussions between the parties, focusing on reaching a settlement without a third party's intervention, and it also lacks the binding authority found in arbitration. Therefore, the unique binding quality of arbitration makes it the correct answer for this question regarding alternative dispute resolution methods.