Should My Business Use Arbitration Clauses in Our Contracts?

 Posted on November 16, 2022 in Business Law

One of the most common clauses that are added to business contracts is an arbitration clause. Many businesses prefer arbitration over litigation, especially given the time and money that litigation can cost a company. If you are considering the use of arbitration clauses in your company’s contracts, make sure you contact a Broward County business attorney to learn the advantages and disadvantages of the arbitration process.

What Is Arbitration?

Arbitration is an alternative dispute resolution process where, per agreement of the parties involved in the dispute, a neutral third party or parties makes a decision that is legally binding. The decision is also private since there are no public filings for the process nor are there any public records.

The parties who are involved in the dispute choose the arbitrator or arbitrators who will then become the party that will resolve the dispute. The arbitration process is less formal than a civil court proceeding, and the arbitrators’ decisions are typically rendered faster than decisions by the court. However, the arbitrator’s decision is legally binding and may be filed as an order of the court.

What Are the Advantages of Arbitration Over Litigation?

If you entered a contract without an arbitration clause and issues develop with the other party, your only contract default option is to seek a remedy from the court. The rules and laws for that litigation will depend on the rules and laws of the court that holds jurisdiction. One unknown variable is that many courts have their own rules and procedures that differ from one another and, depending on the circumstances of your case, some of these rules could hinder your litigation.

The procedural process in arbitration is less formal, which often allows the parties to present all available evidence.

Another advantage to arbitration is that you can include arbitration provisions in your contract that designate arbitration rules should that become necessary. Some of the most common provisions include:

• What type of arbitration process will be used

• What party or parties will conduct the arbitration

• Where the arbitration will occur

• The rules that all parties will adhere to during the arbitration process

• Decide if the arbitration decision will be advisory or binding

What Are the Disadvantages of Arbitration Over Litigation?

If immediate relief is necessary, arbitration is likely not an appropriate legal remedy. In these situations, your attorney may need to take other legal steps through the court system, such as a temporary injunction or other court intervention.

There are also several issues with fees that may need to be considered. Arbitration fees are much higher than court fee filings. In most cases, the arbitrators required their entire fee upfront. And you would still have attorney fees.

Contact a Fort Lauderdale, FL Business Attorney

Entering into any type of business contract can be complex. It is important to ensure that your company is protected, especially if disputes with the contract’s other party arise. Call The Elliot Legal Group, P.A. at 754-332-2101 to schedule a confidential consultation with a skilled Oakland Park, FL contract lawyer and find out what your best legal options are.

Sources:

https://www.americanbar.org/groups/business_law/publications/blt/2022/07/arbitration-agreements/

https://www.wipo.int/amc/en/arbitration/what-is-arb.html