Are Your Arbitration Clauses Enforceable?

Arbitration clauses in contracts can be good or bad, beneficial or harmful, depending on who you are. But in discussing the matter of arbitration with a business attorney, you may come to the decision to include an arbitration clause in your business contracts. If you do, there are things you need to do, to make sure that your arbitration clause is valid and enforceable.

Arbitration clauses are enforceable by courts, and they are legal—assuming they are done the right way. You can be certain that if you have an arbitration clause in your contract, and someone you are suing or who sues you doesn’t want to go to arbitration, the first thing they will do is challenge the legality and validity of your arbitration clause.

Make it Clear

One big thing you can do is make the arbitration clause in your contract very clear, and set out from the other terms of the agreement. You can make the arbitration clause in bold, and it should not be combined with other provisions or terms of the contract—it should be its own section, its own paragraph—and if you really want to be safe, it should even be its own document, requiring a separate signature from the other side.

Maintaining Statutory Rights

Arbitration clauses should not limit anybody’s rights under the law. In other words, if a law says that a prevailing party gets attorneys fees, your arbitration clause should not say otherwise. If a law says that double damages can be won, your arbitration should not alter that.

If a law says that a party has 3 years to bring a lawsuit for a certain claim, the arbitration clause should not shorten that time period.

Whatever the underlying laws say a party can receive if they win a case, should not be altered.

Be Fair

Your arbitration clause should be fair in the procedural context.

In other words, you want to try to ensure that both parties, at least at first, are paying for arbitration costs equally, and that wherever arbitration is to take place, doesn’t cause an undue burden on the other side. You can shift the expenses to the losing side at the conclusion of the case, but at least at first, you don’t want to create expenses or hardships that create an undue bar for a party to have their case arbitrated (like making one party pay all of the arbitrator’s costs up front).

What Arbitrator?

You should ideally spell out in your arbitration clause, what arbitrator or arbitration company will be used. You can even detail how many arbitrators will be used (you can opt to have a panel of arbitrators).

Parties have a right to interview arbitrators or arbitration companies before selecting them. Take advantage of that—and don’t have an arbitration clause that limits a party’s right to do that either.

Call the West Palm Beach business lawyers at The Law Offices of Larry E. Bray today for help with your business law contracts or commercial litigation needs.

Sources:

nolo.com/legal-encyclopedia/arbitration-clauses-contracts-32644.html

ironcladapp.com/journal/contract-management/arbitration-clauses/