Arbitration Agreements for Dummies: What You Need to Know

Arbitration agreements are rapidly becoming more and more common. From employment contracts to consumer agreements, they can be found in many different types of legal relationships. But what exactly are they, and how do they work? Here`s a breakdown of everything you need to know about arbitration agreements for dummies.

First, what is an arbitration agreement?

An arbitration agreement is a contract between two parties that requires them to submit any future disputes to arbitration. Arbitration is a form of alternative dispute resolution (ADR) where a neutral third party (known as an arbitrator) hears evidence and makes a final decision. Unlike mediation, where the mediator only facilitates discussion and negotiation, the arbitrator has the power to issue a binding decision.

Who uses arbitration agreements?

Arbitration agreements are commonly used in employment contracts, consumer agreements (such as credit card agreements), and commercial contracts. Some employers may require their employees to agree to arbitration as a condition of employment. And many companies use arbitration agreements in consumer contracts to avoid expensive and time-consuming class action lawsuits.

Why do people use arbitration agreements?

Proponents of arbitration argue that it is quicker, cheaper, and more efficient than going to court. In arbitration, there are typically no pre-trial procedures like discovery, and the hearing can be scheduled much faster than a court trial. Additionally, arbitration can be more flexible than going to court, as the parties can choose the arbitrator, the location, and the procedural rules.

Critics of arbitration, on the other hand, argue that it is often biased towards the company that drafted the agreement. For example, many arbitration agreements require the parties to waive their right to a jury trial, which can be particularly damaging for consumers and employees who may not have the resources to hire a lawyer to represent them in arbitration.

How do you agree to an arbitration agreement?

Arbitration agreements can take many different forms, but they generally require both parties to sign a contract that includes a clause agreeing to submit any disputes to arbitration. Some agreements may also require the parties to choose an arbitrator or specify the procedural rules for the arbitration.

It`s important to read any arbitration agreement carefully before signing it, as it is a legally binding contract that can have significant consequences down the line. If you have any questions or concerns about an arbitration agreement, it`s a good idea to seek the advice of a lawyer.

In conclusion, arbitration agreements are becoming increasingly common in many different legal relationships. They can have advantages over going to court, but they also come with some potential downsides. Whether or not to agree to an arbitration agreement is a decision that should be made carefully, with a full understanding of the implications.