ABCar Co is a new type of car company. They hire various subcontractors namely DesignCar Ltd., who designs the cars, ManuCar Inc., who manufactures the vehicles, and TestCar Co., who tests the cars before they are put into full production. Recently, ABCar Co has received many complaints about the failure of the braking system. There is a dispute between ABCar Co, DesignCar Ltd., ManuCar Inc., and TestCar Co. as to who is responsible for the problem and who must bear the cost to fix it.

Referring to the dispute resolution mechanisms you explained in question 3 (a) (you don't need to reproduce the information), which dispute resolution mechanism would you select to resolve this dispute and why would you select it? Why would you reject the other ones? (6 marks)

Kindly refer the explanation tab for detailed answer.

Step-by-step explanation

In the given case ABcar co. Is the car company which hires various subcontractors namely Designcar Ltd. which designs the car and Manucar Inc. which manufactures the car and Testcar co. which tests the car before they are put into full production.

The company has received many complaints from the suppliers about the failure of breaking system, Testcar co. is responsible for the problem as they are hired only for testing the final product before put into full fledged production but they had failed to identify the problem at the time of testing the car. ABcar co. is to bear the cost to fix it as they are the owners of the company.

Mediation dispute mechanism would be the best to resolve the dispute. Mediation provides independent unbiased resolution to the dispute as independent neutral third party is appointed to go through the concerns of every party.

Reasons:

1. Cost effective method and flexible. Adjustments are done by parties with their mutual consent.

2.Consumes less time, since a problem of issue in brakes of the cars, is to be resolved expediently in order to maintain the consumer base.

3. Every party and dispute is important to each other. Therefore, relationship is important between them.  Arbitration helps to maintain business relations.

4. Concealment of information- the mediation could be exercised secretly and any issues are not disclosed to outsiders.

The reasons for Non selection of arbitration are as follows:

1. Arbitration is costlier than meditation since it involves the requirement of a technical expert who charges a higher fees.

2. Arbitration is a  formal process as compared to mediation

3. Time consuming.

The reasons that Litigation should not be selected is as follows-

1. High cost and time consuming process.

2. The relationship between parties will be affected negatively.

3. There will be a bad effect on public image of the business entity since the information regarding the business dispute will be exposed to public.