CCNP Dispute Resolution 2 — Questions and Answers
Question 1: In contract disputes, what does the term 'reservation of rights' typically allow a party to do?
- Waive all future claims related to the dispute
- Preserve legal rights while continuing to perform under the contract (Correct answer)
- Suspend performance obligations immediately without liability
- Transfer dispute rights to a third-party assignee
Correct answer: Preserve legal rights while continuing to perform under the contract
A reservation of rights lets a party continue performing while preserving the right to assert claims or defenses later, preventing inadvertent waiver.
Question 2: Which dispute resolution clause feature ensures that parties must attempt negotiation before proceeding to arbitration or litigation?
- Escalation clause (Correct answer)
- Choice of law clause
- Integration clause
- Force majeure clause
Correct answer: Escalation clause
An escalation clause requires parties to pursue progressively higher levels of negotiation or management review before invoking formal dispute resolution.
Question 3: When a mediator proposes a specific settlement figure and asks both parties to accept or reject it confidentially, this technique is called:
- Reality testing
- Bracketing
- Mediator's proposal (Correct answer)
- Caucusing
Correct answer: Mediator's proposal
A mediator's proposal is a technique where the mediator suggests a specific settlement amount and both parties independently decide whether to accept without revealing the other's answer unless both agree.
Question 4: Under the Federal Arbitration Act (FAA), which of the following grounds is recognized for vacating an arbitration award?
- The arbitrator reached a legal conclusion the court disagrees with
- The award was procured by fraud or corruption (Correct answer)
- The arbitration took longer than originally anticipated
- The losing party believes the outcome was commercially unreasonable
Correct answer: The award was procured by fraud or corruption
The FAA allows courts to vacate awards procured by fraud, corruption, or evident partiality—not merely because the arbitrator made a legal error.
Question 5: In dispute resolution, a 'baseball arbitration' or 'final offer arbitration' requires the arbitrator to:
- Split the difference between the parties' last offers
- Select exactly one party's final offer without modification (Correct answer)
- Choose any amount within the range of the two offers
- Hold a hearing and issue an independent award without constraint
Correct answer: Select exactly one party's final offer without modification
In final offer (baseball) arbitration, the arbitrator must choose one party's exact final number, incentivizing both sides to make reasonable proposals.
Question 6: Which of the following best describes a 'dispute review board' (DRB) commonly used in large construction contracts?
- A panel of judges appointed by the court to oversee contract performance
- A standing neutral panel that issues non-binding recommendations as disputes arise during project execution (Correct answer)
- An arbitration tribunal convened only after project completion
- A government regulatory body that monitors contractor compliance
Correct answer: A standing neutral panel that issues non-binding recommendations as disputes arise during project execution
A DRB is a standing panel of neutrals that becomes familiar with a project over time and issues prompt, non-binding (or sometimes binding) recommendations to resolve disputes before they escalate.
Question 7: What is the primary advantage of including a 'mini-trial' clause in a commercial contract dispute resolution provision?
- It eliminates the need for legal counsel, reducing costs significantly
- Senior executives hear condensed presentations and can then negotiate an informed settlement (Correct answer)
- It provides a binding judgment with the same effect as a court verdict
- It allows disputes to bypass arbitration entirely and go straight to federal court
Correct answer: Senior executives hear condensed presentations and can then negotiate an informed settlement
A mini-trial brings senior decision-makers together to hear abbreviated arguments, enabling business-focused settlement negotiations informed by actual legal and factual merits.
CCNP Dispute Resolution 2
In contract disputes, what does the term 'reservation of rights' typically allow a party to do?