What Is an Arbitration Clause?

Using an arbitration clause is crucial to the success of many businesses. Without arbitration clauses, companies can subject themselves to big-time lawsuits. Using an arbitration clause can prevent you from having to spend years in litigation. Are you ready to learn all about arbitration clauses? Let’s get started.

Every arbitration clause gets placed into a contract as its own section. The clause provides the framework about a parties’ rights if a legal dispute takes place. In the majority of clauses, the parties agree that they will not sue one another. Instead, they agree to resolve any disputes through arbitration. Sometimes an arbitration clause gets referred to as the Scott v. Avery clause. Scott v. Avery was a very crucial court case. It set the precedent for how modern arbitration clauses function. Know about Types of Arbitral Tribunal Proceedings. Also, visit The Types of Arbitration.

Arbitration itself is when a third-party arbitrator leads discussions between parties. This process takes place instead of filing suit. The parties settle all their differences during arbitration sessions. This way, they can find a mutual agreement without a court getting involved. At the end of arbitration, an award gets provided to a party. Oftentimes, the award refers to a settlement payment. Arbitration is very laid-back and informal compared to going to court. This relaxed atmosphere positions parties to find solutions on their own terms. Know about Arbitration Agreement Meaning.

The US federal government has made it clear that it endorses the use of arbitration clauses. Why? Without the clauses, US court systems would get overrun with too many cases. The government’s endorsement holds up thanks to the Federal Arbitration Act . That act permits many forms of arbitration, including binding arbitration. Through binding arbitration, parties lose the right to appeal an arbitrator’s decision . What is Final Offer Arbitration.

Is There a Difference Between a Non-Binding & Binding Arbitration Clause?

Yes, all arbitration clauses can have either a non-binding or binding status. A binding arbitration clause refers to the arbitrator’s decision becoming final. US courts will enforce that decision. Unless special circumstances are at play, parties cannot appeal the decision. They have to follow it. That is not the case with non-binding arbitration clauses. These clauses allow any party to reject the decision of an arbitrator. Then, a party can move the dispute to a US courtroom. That is where the final determination will take place. Most parties use binding arbitration clauses. Why? Because they have more authority and make the dispute process go faster. What is Mandatory Arbitration Provision?

Who Arbitrates Disputes?

Sometimes, parties agree/volunteer to take part in arbitration. Other times, US courts force disputing parties to take a dispute to arbitration. Arbitration often takes place because there is an arbitration clause in a contract. The clause forces the parties to resolve any contract-related dispute in arbitration. Must know about Arbitration Definition Economics.

Say that the parties’ contract agreement does not include an arbitration clause. The parties can still decide to arbitrate. But they both have to have an agreement that they will take part in an arbitration session. Otherwise, US courts would have to make the final determination about the dispute.

What Is the Key Advantage of Using Arbitration Clauses?

It’s simple- arbitration clauses lead to countless parties saving time and money. The arbitration process is almost always faster than going through US court procedures. Plus, arbitration is more relaxed and less technical. That relaxed atmosphere contributes to parties resolving their disputes fast. The parties can even create their own schedules. They can also select unbiased arbitrators. None of these benefits would exist without arbitration clauses setting up the process. Also, visit Binding Arbitration Agreement.

What Goes Inside a Contract Containing an Arbitration Clause?

What is an Arbitration contract? Arbitration clauses within contracts often feature specific, legal-minded language. Here is an example. "This is a notice to all parties signing this contract. Hereby stand in agreement to resolve legal disagreements through arbitration. The sign foregoes the ability to file civil lawsuits".

Of course, parties can tailor a clause in any manner that they would like. The key is for arbitration clauses to contain specific information. That information should define who each party is. It should also detail the date that the clause goes into effect. If there is a termination date, that should also go into the clause. Some arbitration clauses can get modified in the future. If that’s what you would prefer, then modification steps should go inside. Many parties also list the consequences for violating an arbitration clause. Know about ADR or Alternative Dispute Resolution Processes.

What Happens When an Arbitration Clause Gets Violated?

Sometimes a party violates an arbitration clause, either by mistake or on purpose. This often takes place when a party files a lawsuit. (Despite language in a contract that forbids all potential lawsuits.) Most arbitration clauses establish that parties agree to give up the right to sue. Instead, they agree to pursue arbitration.

If sued, the non-suing party can always present an arbitration clause to a US court judge. The judge will then decide whether the clause is valid or not. Say that a judge determines that an arbitration clause is valid. Next, the judge can order both parties to adhere to the clause by pursuing arbitration. Cost of Pre Dispute Arbitration Clause.

Should a Party Hire a Lawyer To Help Write an Arbitration Clause?

Guide to Arbitration Law. When it comes to contracts between parties, arbitration clauses can get very technical. That’s why the majority of parties hire the services of an attorney to assist in writing the clauses. Lawyers can help save you time drafting and reviewing your clauses. Many business attorneys excel at composing and revising arbitration clauses. Plus, an attorney could represent you in court and arbitration proceedings. That can happen during any contract or business dispute. Visit How To Use Arbitrate in a Sentence.

Do you need access to an attorney or legal expert who can help you write an arbitration clause? If so, please contact our organization today. We maintain an updated database of arbitration-minded professionals. Our team can connect you to one at any moment.

What Should an Arbitration Clause Include?

Here is what should go inside an arbitration clause. First, specify which exact parties the clause applies toward. Next, list the date that the clause goes into effect and when it terminates. (Keep in mind that some arbitration clauses never expire.) You then should describe whether a party can adjust the terms of the clause in the future. It’s also ideal to list the consequences of violating the arbitration clause. You must know about Arbitration vs Mediation vs Litigation.

Are Arbitration Clauses Legal?

Yes, arbitration clauses maintain full legal standing. In fact, they get enforced every day by the US state and federal government. State contract law almost never undermines them in any capacity. Companies using arbitration clauses enjoy almost 100 percent protection. This applies to all valid consumer contracts. Know about Basics of Arbitration & Litigation .

Why Is an Arbitration Clause Important?

Many legal experts view arbitration as the most efficient method for resolving disputes. That’s because the average arbitration process does not last a long time. Plus, it is often cheaper than most other judicial processes. Using an arbitration clause can protect you or your company from losing money. (And also losing time.) Visit us for Full Scale Arbitration Services.

How Do You Write an Arbitration Clause?

Please contact our organization for help writing an arbitration clause. One of our legal experts can assist you ASAP. We can even review your current arbitration clause to ensure it is complete. Visit Arbitration Provision.

Do You Need Sample Arbitration Clauses & Help With Drafting? Contact Us Now

If you need help composing an arbitration clause, please contact our experts at any time. Our arbitration team of the Arbitration Agreement Association can assist you with any arbitration clause-related process. From viewing sample clauses to drafting a clause for you or your company. We can even provide you with software that will allow you to build your own clause. Remember- a well-written clause is your best protection against losing time and money. And our team is ready to prevent either of those outcomes from affecting you.