Introductory Business Law CLEP Prep Practice Exam

What is the most effective way to resolve a business dispute?

1. Negotiations

2. Litigation

3. Arbitration

4. Mediation

The correct answer is: Arbitration

Arbitration is the most effective way to resolve a business dispute because it employs a neutral third party to make a binding decision for both parties. This helps to avoid biased decisions and potential for further conflict. Options A, B, and D may still be useful methods, but they can be more time-consuming, expensive, and less certain in their outcomes. Negotiations rely on both parties to come to an agreement, which may not always be possible. Litigation involves going to court and can be expensive and time-consuming, often resulting in a win-lose outcome. Mediation also involves a neutral third party, but the decision reached is not binding and may not fully resolve the dispute. Therefore, arbitration is the most effective option for resolving a business dispute.