Arbitration Agreement Model Clauses

Arbitration Agreement Model Clauses: What Every Business Owner Should Know

Arbitration is a process of dispute resolution that has become increasingly popular in business circles. It involves the use of an independent third party, an arbitrator, to settle disputes instead of going through the court system. This process has been found to be faster, more efficient, and generally less costly than litigation. However, before a business can participate in arbitration, it must have an arbitration agreement in place.

An arbitration agreement is a contract between parties, usually included as a clause in a broader agreement, that outlines the terms of arbitration in any future disputes. The agreement is crucial as it provides certainty and predictability for parties entering into business transactions.

Business owners must understand the importance of having a well-drafted arbitration agreement in place. It is also vital that the arbitration agreement follows the correct model clauses to ensure that it is enforceable. Here are four key model clauses to consider when drafting an arbitration agreement:

1. Governing Law Clause – This clause specifies the governing law of the arbitration agreement and any controversies arising from it. The governing law could be the law of a specific state or country.

2. Arbitration Association Clause – This clause specifies the organization that will administer the arbitration. There are several organizations available, including the American Arbitration Association, the International Chamber of Commerce, and JAMS.

3. Number of Arbitrators Clause – This clause specifies the number of arbitrators that will preside over the arbitration. Generally, disputes are resolved by a single arbitrator, but for more complex cases, it can be determined by more.

4. Venue Clause – This clause specifies the location or venues of the arbitration. It is essential to consider where the arbitration will take place and the associated costs of using that location.

When drafting an arbitration agreement, it is crucial to seek legal counsel to ensure that it is enforceable and complies with the applicable laws. The agreement must also be written in clear and precise language that is easy to understand for all parties involved.

In conclusion, including an arbitration agreement with the correct model clauses in a business contract can provide many benefits, including faster resolution of disputes, increased efficiency, and reduced costs. As business owners, it`s essential to understand the importance of these agreements and to ensure that they are well-drafted and correctly adhere to the appropriate model clauses.