Many people are under the impression that they have never had any kind of involvement with arbitration agreements, but would likely be shocked to learn they had actually entered into many arbitration agreements without even realizing it.
Every time we subscribe to a service, join a social media or other type of site, or download an app, the process involves agreeing to the terms and conditions document that the site requires before we can have access. Those terms and conditions and clicking agree is your signature to entering into an arbitration agreement.
What Is Arbitration?
When parties who have entered into a legal contract have an issue with the terms of that contract, one or both parties will file legal action against the other and a judge will decide how to resolve the issue. These lawsuits can be expensive and drawn out and it can take years for the actual issue to be settled.
In order to avoid these legal battles, many contracts will include an arbitration agreement clause which states that should there be a disagreement or contract breach, before anyone files that legal action, the parties will enter into arbitration with the goal of settling the dispute and avoiding any lawsuits.
Arbitration is an alternative dispute resolution where the parties work through their issues with the help of an arbitrator. Each party does have their own arbitration lawyer representing them. These agreements typically have stringent parameters for how the arbitration process should proceed. Some of the parameters that can be included in these agreements include:
- How arbitrators will be chosen
- How many arbitrators will be used for the process
- What the rules of the arbitration will be
- Where the arbitration will take place
Benefits of Arbitration
There are several benefits to resolving disputes using arbitration instead of litigation. As mentioned above, litigation can be quite costly with all the legal fees and court costs, especially if there are several disputes the parties are having issues with. And the process moves along much more quickly than the litigation process.
Another benefit is that the arbitration process is confidential, unlike litigation which creates a public record, and the dispute – including all the disputes – is open to anyone.
The disadvantage of arbitration over litigation is that whatever decision the arbitrator makes is final. Parties cannot appeal that decision like they could if they disagree with a judge’s decision in a lawsuit. It can also be more difficult to conduct discovery for the arbitration process compared to a civil lawsuit.
Contact an Arbitration Lawyer
If you are drafting a contract or getting ready to sign a contract/arbitration agreement the other party has drafted, it is important to make sure you are fully protected and understand how the document will benefit you and what some of the disadvantages may be. An experienced arbitration lawyer can help you both before you sign any documents, as well as if you find yourself in a dispute where arbitration may be a requirement.
Thank you to our friends at Robinson & Hadeed for their information about arbitration agreements.