What is the purpose of alternative dispute resolution (ADR) in contract management?

• A. To escalate disputes to court immediately.
• B. To replace negotiations with arbitration only.
• C. To resolve disputes efficiently, reduce litigation risk, and preserve relationships through negotiation, mediation, or arbitration.
• D. To avoid any form of dispute resolution.

Answer: (C)

ADR focuses on resolving disputes without going to full-scale court litigation, using methods like negotiation, mediation, and arbitration to reach solutions more quickly and with less cost. In contract management, disputes often arise from differing interpretations, performance issues, or breaches, and ADR provides a pathway to settle these tensions while protecting business relationships and keeping information private. This approach lowers litigation risk, speeds up resolution, and often results in more flexible, collaborative outcomes than a courtroom fight. The option that captures all of this—efficiently resolving disputes, reducing litigation risk, and preserving relationships through negotiation, mediation, or arbitration—fits ADR best. The other choices miss the point: ADR is not about skipping resolution entirely, not limited to arbitration, and not about escalating disputes to court immediately.