In the business world, contracts are the backbone of any partnership as they outline the terms and responsibilities of each party involved. However, breaches of contract can and do arise. When they do, the consequences can be costly and time-consuming.
One way to mitigate these risks is through arbitration, a form of alternative dispute resolution. If you are considering arbitration to resolve a dispute due to a breach of contract, how can you confirm it is the proper method for your business?
What happens during arbitration?
During arbitration, a neutral third-party arbitrator aims to resolve a dispute between two or more parties. The arbitrator listens to both or all sides of the dispute, reviews evidence and makes a binding decision to resolve the issue.
Pros of arbitration
Arbitration proceedings are typically faster than traditional litigation, allowing businesses to resolve disputes quickly and return to operations. Arbitration can also be less costly than litigation. In addition, proceedings are often confidential, which can be beneficial for businesses that want to keep disputes private.
Cons of arbitration
Meanwhile, arbitration also has some drawbacks. There can be limited options for appeal because arbitration decisions are often final and binding. Additionally, proceedings and awards are often confidential and not publicly disclosed, which can lead to a lack of transparency and accountability.
Drafting an arbitration clause
When drafting an arbitration clause, businesses should clearly define the scope of disputes that arbitration will seek to address and resolve. The clause should also specify the jurisdiction and law governing the arbitration and choose a set of rules and procedures. Further, the clause must set a process for selecting an arbitrator.
Resolving disputes efficiently
Arbitration can be a crucial tool for your business to resolve contract disputes efficiently. However, it is vital to weigh its pros and cons. As you manage the complexities of the law, seeking legal guidance may help you explore your options, make informed decisions and protect your rights and business interests.
