An arbitration clause is a statement in a contract that requires the parties named therein to resolve disputes through arbitration. This means litigation is not an option if a dispute arises, which can be beneficial for both parties involved. When properly drafted, an arbitration clause will afford a business greater security, more privacy, and lower expenditures.
By and large, disputes can be resolved far more quickly through arbitration than they can through court hearings. The time it takes for a case to make it to court can amount to years, which is often an unacceptable timeframe for businesses. Arbitration hearings, on the other hand, require less preparation and waiting and can be resolved far more quickly than a court hearing with a judge and jury.
One of the ways arbitration expedites the process of dispute resolution is by limiting discovery. The process of gathering evidence can be time-consuming, and it is also often very tedious. A well-written arbitration clause in a contract will set limits on how the discovery process should be carried out and how long it should be allowed to take.
More Control Over Outcomes
The nature of a court case encourages both sides to fight for every inch they can and dispute every issue in their efforts to prove their case. Even then, the end result is ultimately up to the judge or jury, and they will likely have some bias one way or another. An arbitration clause, however, will avoid this precarious process by allowing the parties involved some control over who arbitrates the dispute. This makes it more likely to get a fair-minded individual who will apply the law without as much bias as a randomly selected judge or jury would.
Arbitration hearings are kept private, unlike court hearings which are matters of public record. This means the parties involved are able to maintain a positive reputation and avoid disclosing trade secrets and other confidential information in public arenas.
Arbitration clauses can include provisions for the prevailing party to recover expenses for attorney fees. This means that if you win the arbitration, the other party will cover the costs of hiring a lawyer. In addition, since arbitration typically takes less time than outright litigation, you won’t have to pay your lawyer as much. Court fees and other expenses are also avoided.
Preserved Business Relationships
Court settings are strictly win-lose scenarios, which means business relationships can be easily destroyed in the course of litigation. The more relaxed atmosphere of an arbitration hearing, on the other hand, allows the possibility of cooperation in the course of reaching a solution. In addition, both sides will usually work together to select the arbitrator, which further encourages collaboration. This is not to say that there won’t be a winner and loser in the course of arbitration—it merely means that it’s not always strictly the case, especially if it’s handled well.
Drafting an Arbitration Clause
In order to be most beneficial, arbitration clauses must be carefully worded and include various specific provisions. This requires legal experience, which you can find with the attorneys at Hard David Carson, LLP.