Arbitration Clauses

Summary

These arbitration clauses (which include a comprehensive clause, a simple clause, and a simple clause with fee allocation) can be used in a commercial agreement to compel the parties to arbitrate any dispute that may arise out of or is related to their agreement. These clauses include practical guidance and drafting notes. The clauses include details governing the arbitration process. There are pros and cons associated with both litigation and arbitration. Arbitration is more private than a trial, and is a less formal proceeding. Many consider arbitration as a less expensive and quicker resolution of a dispute, but there could be an arbitrator who could extend the timeframe and increase costs. In addition, an arbitration proceeding may become more expensive due to the cost of the arbitrators, who typically charge a significant fee. Arbitration also allows for a more expansive introduction of evidence since there are no exclusionary rules, as the arbitrator may allow more evidence, testimony, and documents to be considered than a judge would allow in a court room or in front of a jury. Conversely, there is also the possibility of reduced level of discovery, whereby a party may not be able to gather as much information regarding a dispute as compared to a regular litigation proceeding. There is no jury to decide the issues which may be advantageous to one party, but not the other. Another concern is that the arbitration decision is final and there is usually no right to appeal. Decisions may also be more subjective based on broader principles of justice and equity which may or may not have been supported in a body of law. For a full listing of related contract clauses, see General Commercial Contract Clause Resource Kit. For further guidance on arbitration, see Arbitration Advantages and Disadvantages, Arbitration Laws Overview, Arbitration Clause Drafting, Arbitration Clauses: Common Problems Checklist, and Arbitration Clauses Resource Kit. To compare state laws on arbitration, see the Arbitration State Law Comparison Tool.