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Should your business contracts include an arbitration clause?

On Behalf of | Dec 20, 2022 | Business |

Most business contracts today include an arbitration clause that addresses whether a dispute, such as a breach of contract or a disagreement between the parties, will be solved in court or arbitration.

Arbitration is an effective alternative to litigation for business owners who wish to solve conflicts with customers and other businesses. First, it is non-adversarial and much simpler. Arbitration clauses simplify the conflict between the parties and is a faster and more efficient way of handling conflict. Second, it can save businesses millions of dollars.

What is arbitration?

Arbitration is one type of alternative dispute resolution (ADR) that is outside of the court system. It has proven to be highly effective in solving conflicts of all kinds. It is used in all types of conflicts, including heavily in business law due to its practicality. It is cost-efficient and less time-consuming than going to court, making it a very attractive option for companies who have to deal with conflict regularly. Arbitration makes the process of solving problems faster.

Arbitration is private and not subject to court rules and regulations. In choosing arbitration, you reduce your risk of a lawsuit and the expense of legal fees. It is important to note that most arbitration is binding, which means that the decision rendered by the arbitrator is final.

Arbitration clauses in high-volume business contracts decrease the risk of litigation, which is why it is worth considering. High-volume businesses are especially vulnerable to adverse legal action, and arbitration clauses can help control some of that risk.