Enforcing Binding Arbitration Clauses
People frequently sign contracts which contain arbitration clauses. Arbitration is a process where a third party (or a panel of third parties) hear the evidence in a case and decide the outcome. This process is usually binding. Often these third-party arbitrators are attorneys in private practice who assist in the resolution of disputes. There are many reasons arbitration clauses appear in contracts. Conventional wisdom dictates that arbitration is less expensive and faster than litigation in State or Federal Court. Often that is the case, sometimes it is not. In fact, sometimes the cost of arbitration is prohibitive in pursuing a customer for non-payment. Thus, businesses should think about their circumstances when deciding whether arbitration of all disputes with customers is appropriate, or whether only certain types of disputes are to be resolved by arbitration. Often, arbitrators award less in damages than a jury might award. Thus, those who tend to face lawsuits in the personal injury context often attempt to contract for disputes to be resolved through binding arbitration.
