Oregon Construction Contractors (CCB) Practice Test

Which process utilizes third-party arbitrators to render a legally binding decision for all parties?

1. Mediation

2. Litigation

3. Arbitration

4. Negotiation

The correct answer is: Arbitration

Arbitration is a process specifically designed to resolve disputes by employing third-party arbitrators who make legally binding decisions. This process is characterized by its structured nature, where both parties present evidence and arguments to the arbitrators, who then evaluate the case and issue a ruling. One of the primary advantages of arbitration is that it often provides a faster and more cost-effective alternative to traditional court litigation, while still maintaining formality and enforceability of the outcome. In contrast, mediation involves a neutral mediator who helps the parties communicate and negotiate a mutually agreeable solution, but the mediator does not impose a decision. Litigation refers to the process of taking legal action in court, where judges render decisions based on applicable laws, while negotiation is a direct discussion between parties aimed at reaching an agreement without third-party involvement. Thus, arbitration uniquely involves a third party who has the authority to make binding decisions, distinguishing it from the other processes.