Arbitration Agreement Essentials
Arbitration agreement essentials state that when parties don't agree on a matter, they won't go to court to get their dispute resolved.3 min read updated on February 01, 2023
Arbitration agreement essentials state that when parties don't agree on a matter, they won't go to court to get their dispute resolved. They go instead to an arbitrator as a way to get justice. The arbitrator, who is a neutral third-party, makes a decision on what happens in the matter. Arbitration agreements need to be in place before disagreeing parties go into arbitration because arbitration can't be forced.
When Arbitration Is Non-Negotiable
Contracts usually establish agreements to arbitrate. Provisions or clauses are included that state the involved parties will settle the disagreement through arbitration, should disagreements arise. If the contract contains an arbitration clause, this method of conflict resolution is non-negotiable.
Arbitration Is Court-Supported
Laws at the U.S. federal and state levels support arbitration. If an arbitration clause has been signed and a disagreement arises, the court generally forces the parties to undergo arbitration. Sometimes, however, courts won't enforce arbitration clauses. This happens when:
- The person asked to sign the arbitration clause wasn't informed of the fact that his or her rights to challenge disputes in court were being forfeited, and that arbitration would be required.
- The arbitration clause is prepared and presented in an unfair manner.
Concerns About Mandatory Arbitration Clauses
Some people have noted concerns they have regarding mandatory arbitration clauses. These concerns include the fact that:
- It prevents whistle-blowing that can enhance public safety. People who agree to arbitrate can't expose wrongdoings in public due to the private nature of arbitration. When the information never goes beyond arbitration, members of the public don't have the opportunity to learn about any improper things a company might have done.
- It separates the people who sign the agreements from the power they would otherwise have to join a class-action lawsuit.
- It puts the decision in the hands of a single person because there's no jury to make the decision.
- The fact that the companies are the ones paying the arbitrator could influence the arbitrator to rule on the side of the company that provides his paycheck.
In the case of consumer issues, it's generally thought that consumers will do better with a court ruling than they would do with arbitration. A well-written arbitration agreement creates a set of guidelines for handling arbitration and creates a set of expectations for both parties as they go through the steps to resolve their dispute. The way the agreement is written needs to address several issues. These issues include the administrative body, the arbitrator's powers, and what degree of discovery will be used. As a rule, these clauses provide a framework for the total dispute resolution process.
Basic arbitration isn't the only dispute resolution option available to you. Tools you can use as you go through the arbitration process include hiring a mediator, having the situation evaluated by a neutral party early on, or even escalating the issue to senior members of your company.
To decide between the different tools that are available to you, you need to have a clear understanding of the advantages and disadvantages of each one. In some situations, combining the available tools in a chosen order or at the same time can be your best choice.
Cost-Efficiency Is Key
Resolving the dispute with the least amount of wasted money is the main goal. As an example, if you go through the arbitration tools that you select in the chosen sequence, you would do the one that costs the least before proceeding to the others. There can, however, be problems as a result of this approach. This is especially true when the conditions for having the case arbitrated have already been met.
Several dispute resolution entities exist to handle both domestic and international disputes. Each arbitration provider has published a set of regulations for resolving disputes that are conducted under its authority. There are, however, wide variations between the rules of the main arbitration providers. This adds to the importance regarding the administrative body you choose.
If you need help with an arbitration agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.