Small Business Contract Disputes: Litigate or Mediate?
Published 2026-05-18 · Legal Niche Pros
FAQ
Can I ignore a mandatory arbitration clause in my contract?
Generally no — courts routinely enforce valid arbitration clauses and will often dismiss or pause a lawsuit filed in violation of one.
Is mediation binding?
No, mediation is non-binding unless both parties agree to a final settlement; arbitration, by contrast, typically is binding.
When a business contract goes sideways, owners often default to 'I'll sue them' — but litigation is frequently the slowest and most expensive of three realistic paths, and the right choice depends heavily on the relationship and the contract's own terms.
Check the contract first
Many business contracts already specify a dispute-resolution process — often mandatory arbitration or mediation — in a clause you may have signed without reading closely. That clause typically controls, regardless of what you'd otherwise prefer.
Mediation vs. arbitration vs. litigation
Mediation is non-binding and aimed at a negotiated settlement with a neutral third party — fastest and cheapest, but only works if both sides genuinely want to resolve it. Arbitration is binding, faster than court, but limits your appeal rights. Litigation is the most thorough and public option, with full discovery and appeal rights, but also the slowest and most expensive.
For an ongoing business relationship worth preserving, mediation is often worth attempting first even where it's not contractually required, simply because it's the only path that leaves room for the relationship to continue.