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Contract Dispute Resolution in Canada: A Guide to Mediation, Arbitration, and Litigation

June 24, 2023

Contract disputes can arise in various business transactions, and when conflicts arise, it is essential to have a clear understanding of the available dispute resolution methods. In Canada, parties involved in contract disputes have several options for resolving their conflicts, including mediation, arbitration, and litigation. Each method has its unique characteristics, advantages, and considerations. In this guide, we will explore the process and key aspects of mediation, arbitration, and litigation in the context of contract dispute resolution in Canada. Whether you are a business owner, professional, or individual navigating a contract dispute, this guide aims to provide valuable insights to help you make informed decisions regarding the most suitable dispute resolution approach.

Understanding Mediation

Mediation is a widely used alternative dispute resolution method that offers a constructive and collaborative approach to resolving conflicts. In mediation, a neutral third-party mediator facilitates communication and negotiation between the parties involved in a dispute. The mediator acts as a guide, helping the parties explore their interests, needs, and concerns, with the ultimate goal of reaching a mutually satisfactory resolution. Unlike litigation or arbitration, mediation does not involve a formal judgment or decision imposed by a judge or arbitrator. Instead, the mediator empowers the parties to actively participate in the process, encouraging open dialogue and creative problem-solving. Mediation is a voluntary and confidential process, allowing the parties to maintain control over the outcome and preserving relationships. It offers a flexible and customized approach, tailored to the unique circumstances of each dispute. By fostering communication, understanding, and cooperation, mediation can often lead to more amicable and sustainable resolutions, promoting a win-win outcome for all parties involved.

Understanding Litigation

Litigation is a formal legal process of resolving disputes through the court system. When parties opt for litigation, they present their case before a judge or jury, who will make a binding decision based on the evidence and arguments presented. Litigation typically follows a structured and adversarial approach, with each party presenting their version of the facts and legal arguments to support their position. The court’s decision, known as a judgment, is legally binding and enforceable. Litigation provides a robust and comprehensive mechanism for resolving complex disputes, ensuring that legal rights and obligations are upheld. However, it is important to note that litigation can be time-consuming, costly, and may strain relationships between the parties involved. It is often considered a last resort when other dispute resolution methods have been exhausted.

Understanding Arbitration

Arbitration is another alternative dispute resolution method that offers a private and streamlined process for resolving conflicts outside of the court system. In arbitration, the parties agree to submit their dispute to one or more arbitrators, who act as neutral decision-makers. The arbitrators, who are typically experts in the relevant field, consider the evidence and arguments presented by both sides and issue a binding decision known as an arbitral award. Arbitration allows the parties to have more control over the process, including the selection of arbitrators and the rules governing the arbitration. It offers a more flexible and efficient alternative to litigation, with a faster resolution timeline and the ability to choose a specialized arbitrator. However, it is important to carefully review the arbitration agreement and consider the potential limitations, such as limited opportunities for appeal and potential costs involved in engaging arbitrators. Let’s explore in more depth the pros and cons of three commonly used dispute resolution methods. Each method offers its own set of advantages and considerations, presenting parties with various options for resolving contract disputes in Canada.

Mediation Pros and Cons


  • Facilitates Communication: Mediation encourages open communication between the parties, providing an opportunity for them to express their interests, needs, and concerns in a constructive environment.
  • Collaborative Approach: Mediation promotes a collaborative approach to resolving disputes, allowing the parties to work together to find mutually satisfactory solutions.
  • Empowers Parties: The mediation process empowers the parties to actively participate in the resolution, as they have control over the outcome and are involved in crafting the final agreement.
  • Preserves Relationships: Mediation focuses on preserving relationships as it seeks to find common ground and maintain a positive rapport between the parties involved.
  • Customized Solutions: Mediation allows for flexible and tailored solutions that address the unique circumstances of each dispute, leading to more creative and personalized outcomes.


  • Non-Binding Resolution: The agreement reached in mediation is not legally binding unless the parties choose to formalize it through a separate legal process.
  • Lack of Enforceability: If one party fails to comply with the mediated agreement, enforcing the terms may require further legal action.
  • Dependency on Cooperation: Successful mediation relies on the willingness of all parties to engage in the process and actively participate in reaching a resolution. If one party is uncooperative, the process may be less effective.

Litigation Pros and Cons


  • Legal Authority: Litigation provides a formal legal process where a judge or jury renders a binding decision based on the presented evidence and arguments.
  • Comprehensive Resolution: Litigation allows for a comprehensive examination of the dispute, with legal principles and precedents guiding the decision-making process.
  • Enforcement of Judgment: A court judgment is legally binding and enforceable, ensuring that the parties comply with the decision.
  • Access to Legal Remedies: Litigation provides access to a range of legal remedies, including monetary damages, injunctions, and specific performance orders.


  • Time-Consuming: Litigation can be a lengthy process, involving various stages such as filing pleadings, discovery, motions, and trial, which can significantly extend the resolution timeline.
  • Costly: Litigation expenses can escalate quickly, encompassing legal fees, court costs, expert witness fees, and other related expenses.
  • Strained Relationships: The adversarial nature of litigation can strain relationships between the parties involved, as they advocate for their positions and engage in legal disputes.

Arbitration Pros and Cons


  • Efficiency: Arbitration typically offers a faster resolution timeline compared to litigation, as it does not face the same backlog of cases in the court system.
  • Specialized Expertise: Parties have the flexibility to select arbitrators with expertise in the subject matter of the dispute, ensuring knowledgeable decision-making.
  • Confidentiality: Arbitration proceedings can be kept confidential, providing privacy to the parties involved.
  • Flexibility in Procedure: Parties have greater control over the arbitration process, including selecting the rules, procedures, and location.
  • Final and Binding Award: The arbitral award is final and binding on the parties, with limited opportunities for appeal.


  • Limited Appellate Options: The grounds for challenging an arbitral award are limited, restricting the opportunities for appeal compared to the court system.
  • Cost Considerations: Arbitration can still involve significant costs, including arbitrator fees and administrative expenses.
  • Lack of Public Record: Unlike litigation, arbitration does not create a public record of the proceedings, which may limit the ability to establish legal precedents.

It is important to carefully consider the specific circumstances of each dispute and the desired outcomes when choosing the most suitable dispute resolution method. Parties should seek legal professional advice and weigh the pros and cons of mediation, litigation, and arbitration before making an informed decision.

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