It's typical for contracts and agreements to include arbitration clauses to set the stage for future dispute resolution. You've probably signed into an Arbitration Agreement numerous times without even realizing it. It's a common strategy to avoid complicated legal procedures to resolve a dispute that can be managed through more straightforward channels.
Conversely, some contracts purposefully exclude arbitration clauses or other dispute resolution procedures. In that case, you may want to specifically use an Arbitration Agreement to protect yourself from court proceedings costs. Arbitration is almost always a less expensive and faster way to resolve disputes than the court system.
An Arbitration Agreement is a legally-binding document stating that two or more parties agree to settle future disputes through arbitration. In other words, the first line of dispute resolution will involve submitting evidence to an arbitrator outside of the court system. The agreement is restricted to disputes related to business dealings in a specific context. It does not extend to any possible conflict between the contracting parties.
By agreeing to use arbitration, the two parties of the agreement waive certain rights for the benefit of avoiding costly legal proceedings. Anyone entering into an Arbitration Agreement should understand the advantages and drawbacks of arbitration before signing it.
Depending on your state, an Arbitration Agreement may also be known as:
Dispute Resolution Agreement
Mediation and Arbitration Contract
Arbitration Contract
Dispute Negotiation Agreement
Submission Agreement
Arbitration Agreements are usually part of an extensive business relationship between two parties. Anyone entering into a business relationship may want to establish dispute resolution procedures as a part of that relationship.
Whether someone wants to use arbitration or not to resolve disputes depends on how advantageous it may be. Arbitration is often less costly than going through the courts, and an arbitrator rather than a judge examines the evidence. However, it's impossible to predict all the disputes that may arise from the business relationship, and some may need or benefit from court intervention.
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To create your document, please provide:
Governing State: If your Arbitration Agreement includes a governing law provision, you'll need to select the state laws that apply to it.
Effective Date: The date when the Arbitration Agreement will go into effect.
The Parties involved: The full names, addresses, and contact information of each party in the Arbitration Agreement.
Relationship Between Parties: The reason why the parties are entering into an Arbitration Agreement. If the Arbitration Agreement relates to an earlier agreement between the parties, you'll need to provide the full title and effective date of that agreement.
Arbitration Location: The city and state where the arbitration is held if disputes arise.
Arbitration Details: Here, you may specify a professional arbitration group you wish to settle disputes. Additionally, you will choose how the parties will be notified of a submission to arbitrators, how many arbitrators will be used to resolve conflicts, and the arbitrators' necessary experience.
Arbitral Notice: When an arbiter takes notice of common knowledge facts or laws not reasonably disputable to reach decisions.
Binding Arbitration: Establishes the conclusion reached by arbitrators is final and cannot be appealed.
Award: When arbitrators rule in favor of either party, the favored party receives an award, which can be anything from financial recompense to the right to continue business practices disputed, depending on the matter being arbitrated.
Arbitration Costs: The arbitration fees. Typically, these are split equally among the parties involved unless otherwise stated by the arbitrator or expressly outlined in the Arbitration Agreement.
All the parties involved in the business relationship need to sign the Arbitration Agreement to be legally enforceable.
Notarizing the signatures of an Arbitration Agreement is not necessary. However, it may be helpful to include either witnesses or a notary public's signature to ensure the signatures aren't challenged later.
Each party should receive an executed copy of the Arbitration Agreement for their records. If the Arbitration Agreement relates to a previous contract or agreement, a completed copy should be attached to the existing agreement.
An Arbitration Agreement does not need to be filed with any local or state records office since it is a private contract.
Arbitration clauses may be a part of a business agreement and by signing the agreement you are agreeing to the arbitration stipulations. While you can’t be forced to sign any agreement, dispute resolution through arbitration may be a condition of participating in an agreement.
Yes, an Arbitration Agreement isn’t a precondition for the use of arbitration. Typically, Arbitration Agreements are drafted and executed at the beginning of a business relationship, before disputes arise. But arbitration is available to resolve disputes at any time without a previous agreement to do so.
Yes. Arbitrations are less formal than court proceedings, but the decision of the arbitrator is final and signing an arbitration agreement means you’re agreeing to comply regardless of the outcome.
The main reason is to avoid the lengthy procedures required to have a case heard in a court as well as the costs involved. Moreover, while litigation is public, arbitration proceedings are private so they may be more conducive to keeping business matters out of the public eye.
No. While the arbitration process is technically adversarial, an attorney is not required. However, it may be advisable to enlist the aid of an attorney, especially if the disputes in question have complex legal implications that would otherwise be difficult to navigate.
The Arbitration Agreement will include the channels you need to use to notify the other parties of a dispute and the nature of that dispute. Once all the parties agree to arbitrate, contact the chosen arbitrating body or group to determine the next steps for the arbitration process.
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