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Should you include an arbitration clause in your business contracts?

On Behalf of | Dec 22, 2022 | Breach Of Contract, Business Law, Complex Business Issues

The decision to include or exclude an arbitration clause in your business contracts is critical. Many businesses include arbitration clauses, which can be beneficial in some cases. In contrast, it can limit companies from holding the breaching party fully accountable under the law through litigation.

Litigating a breach of contract can be expensive and time-consuming. Still, it allows your legal team access to resources to defend your claim and protect your business and interests via the court system that would not be otherwise available to you in arbitration.

However, adding an arbitration clause to your contract may be worth considering for multiple reasons, including but not limited to: 1) cost; 2) privacy; and 3) control over who oversees the action.

What is arbitration?

Arbitration is a form of alternative dispute resolution used as an alternative to litigation to solve conflicts between parties. It is outside of the court system, usually binding, and it is a private process that involves the parties, an arbitrator or panel of arbitrators typically chosen by the parties.

What is the role of the arbitrator(s)?

The arbitrator or panel of arbitrators is to be a neutral third party. They hear arguments, evaluate documents from the parties involved in the dispute, and render an award. The arbitration process is not subject to the rules of court. It is also more flexible and less formal.

When should I consider arbitration?

Specifically, in breach of contract disputes involving large companies or corporations who do not want their trial information to be public, as it usually would be in a court of law, it may be an excellent and worthwhile alternative to consider.

There are many ways to resolve conflicts. While litigation is the most known, it makes sense to consider alternative forms of dispute resolution depending on the circumstances.