Mediation, arbitration and small claims courts are three ways small businesses can resolve disputes without resorting to the expense and time of a lawsuit.
Because an agreement arrived at through mediation does not have to be binding to the disputing parties, it is a more informal process that offers more potential for the parties to work together in the future. Arbitration does result in a legally binding decision; the arbitrator functions like a judge and the proceeding is more like a traditional court case. However, like mediation, it does not involve the time and expense of a court case.
A third option is small claims court. Each state operates its own small claims court and sets its own limit on the dollar amount that can be awarded.