Don’t Overlook the Arbitration Clause

One thing you may be surprised to find in a contract is a provision requiring disputes to be handled through arbitration. In everyday contracts entered into by consumers, clients, employees, etc. these provisions are often overlooked at the time of signing. In some contracts, they are disguised as typical boilerplate provisions. Nonetheless, a proper arbitration clause will typically be enforced by a court.

The arbitration process has pros and cons in comparison to handling a matter in the court system. But before entering into an agreement that includes an arbitration clause, you should consider the additional costs that may be required. Arbitration requires at least one arbitrator in order to decide the case; these arbitrators and/or the arbitration organizations generally have to be paid for their services. These fees can vary widely, but the last thing you want is to find out after the fact that you must pay thousands of dollars in fees just to have your case heard. For that reason, it is highly recommended that you do your homework on the front end.

Arbitration clauses can also dictate where the case will be handled and limit your rights to bring collective or class actions. In some cases, though, the possible drawbacks of arbitration may be preferable to the litigation process, which usually takes longer and requires more legal fees and expenses. If you have questions about the enforceability of an arbitration provision or about the arbitration process you should contact an attorney.