Arbitration Clauses

Litigation. The term literally sends shivers down the spine of many business owners. Everyone has heard the story of astronomical jury verdicts and out of control attorney fees related to these court cases. Many companies, both small and large, have included arbitration clauses in their contracts - whether they are contracts with their employees or contracts with other businesses for goods and or services.

A properly drafted arbitration provision in a contract reflects the parties' agreement to resolve issues that arise out of their contract through the arbitration process. The parties usually waive litigating their claims in court.

Although the cost of filing an arbitration claim is more expensive than filing a case in the local superior court, the parties involved will likely save money in the long run by controlling, and even perhaps eliminating, certain procedures within the arbitration process. Parties have no direct control of similar stages in court litigation. An example of a procedure that may be avoided completely in the arbitration process is the discovery process - a fact finding stage that every party has a right to if they are directly involved in court litigation.

However, arbitration is not without its negatives. One of the downsides of arbitration is that an arbitrator, or arbitrators, may rule based on equity (essentially, what the arbitrator deems is fair) or law. Courts usually rule based on law.

There are many positives and negatives to including an arbitration provision in a contract. If you need help in deciding if an arbitration clause is proper in your situation, need help drafting one, or if you have a dispute that needs to be resolved in arbitration, please feel free to contact the Law Offices of Scott D. Wu for assistance.

The information on this blog is not legal advice, nor is it intended to create an attorney-client relationship. Legal questions should be directed to a lawyer of your own choosing.

Scott D. Wu is an attorney licensed to practice in California. His firm focuses on various aspects of business law, family law, personal injury and real estate.

The information on this blog is not legal advice, nor is it intended to create an attorney-client relationship. Legal questions should be directed to a lawyer of your own choosing.