Tennessee Private Investigator Licensing Practice Exam

What is Arbitration in the context of legal disputes?

1. A meeting in which parties negotiate

2. A process involving a third party

3. A formal lawsuit filing

4. A mediation session

The correct answer is: A process involving a third party

Arbitration is a method of resolving legal disputes outside of the traditional court system, involving a third party known as an arbitrator. In this process, the parties in dispute present their cases and evidence to the arbitrator, who then makes a binding decision. This approach can often be quicker and less formal than going through the courts, which is why many individuals and businesses choose arbitration as an alternative for conflict resolution. The other options do not accurately describe arbitration. Negotiation, while it may involve direct communication between the parties, does not include a third party making a decision. A formal lawsuit filing is part of the court process, which is distinct from arbitration, as it involves taking a dispute to a judge rather than to an arbitrator. Lastly, a mediation session also involves a third party but is different from arbitration; a mediator facilitates discussion and helps the parties reach a mutually agreeable solution instead of making a binding decision.