When negotiating an agreement between your business and a supplier or contractor, one thing that can be buried in the legal terms is how disputes about the contract are handled. This can become important when a dispute between you and the other party arises, even if it’s years down the road. Many businesses choose to include arbitration provisions in their contracts, which state that any disputes will be decided in front of an arbitrator. There are a number of good reasons to choose arbitration, but also some disadvantages.
Advantages of Arbitration
Handling contract disputes are often the last thing a business wants to worry about and arbitration gives them a faster solution to their issues. Where going to court can be a drawn-out and expensive process, arbitration offers a quicker time frame and often, lower related legal fees. Arbitration also isn’t bound by the rules of evidence and the rules of civil procedure, so the proceedings can have a more relaxed flavor that can work better for some situations.
Many businesses prefer arbitration because it is a useful way to keep trade secret or other proprietary information confidential. The attorneys, arbitrator, and others involved can be bound by a nondisclosure agreement before viewing the material and the arbitration documents are not put into the public record the way court documents are recorded and discoverable at the clerk’s office.
For industries that require a high level of subject matter expertise, the ability to choose an arbitrator who is also well versed in the field is key. Instead of having to educate the arbitrator on the industry, standards, and more, the arbitrator can bring their own wealth of knowledge to the table. The ability to choose the decision-maker or name who is on the arbitration panel is a big draw to choosing arbitration for dispute resolution.
International contracts often take advantage of arbitration rather than risk subjecting themselves to the jurisdiction of a foreign country. A whole industry exists around arbitrating international disputes with its own body of rules and case law. For a major contract, the arbitration clause will often include terms regarding what set of arbitration rules will bind the parties.
Disadvantages and Things to Consider
While arbitration offers speed, it often skips certain steps in the legal process. Once you’ve submitted to binding arbitration, you have only a very limited ability to appeal the decision the arbitrator made, which may be an issue when relaxed discovery rules mean evidence comes in that a trial court would keep out. Further, an arbitrator is a single individual or a panel of arbitrators, not a jury. Choosing arbitration means you’re giving up the right to a jury trial.
Because our litigation work focuses primarily on business and real estate issues, our lawyers are familiar with arbitration and how to handle complex contract disputes. We can advocate for your position in both situations and work with you to best protect your interests. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 and set up a free consultation today.