ARBITRATION CLAUSES: ARE THEY RIGHT FOR ME?

One popular topic in business law is arbitration clauses. Arbitration clause in contracts allow disputes to be resolved through arbitration, as opposed to the court process. Arbitration is a private process which tends to be far less formal than the court process. Arbitration is generally far more efficient than the court process for business litigation, and thus tends to be a lot less expensive for the parties involved. Because of the reduced costs, arbitration tends to be favored by large businesses. However, the reduced cost and increased efficiency can come at a cost of reduced discovery and procedural protections which may benefit individuals and smaller businesses, depending on their appetite for litigation.

Both Florida and federal laws strongly favor the arbitration of disputes, and courts are often eager to dispose of cases which should be arbitrated. Therefore, arbitration clauses in contracts will generally be construed broadly by courts. Nonetheless, the language of an arbitration clause is important. Narrow language in an arbitration clause may only require breach of contract actions to be arbitrated, while broader language may serve to include certain related causes of action, such as that the contract at issue was induced by fraud. Typically, an arbitration clause should state that all disputes “arising out of or relating to” the contract should be arbitrated in order to cover as many potential causes of action as possible. Consult a business lawyer to craft the appropriate language to suit your particular situation.

Arbitration clauses may also establish a procedure for selecting an arbitrator (or arbitrators). Be sure to research an arbitrator before agreeing to them. Most arbitrators are retired judges, but they do not necessarily need to be. Sometimes, arbitrators may not be lawyers at all, but are instead, businesspeople experienced in a particular field.

Once the arbitrator issues an award, courts will rarely set that award aside, except on extremely narrow grounds which are difficult to prove. Therefore, it is important to take the arbitration seriously to avoid a negative result with little hope of relief. Depending on the amount at issue, the involvement of an attorney at the earliest stage possible may be warranted. The inclusion and crafting of an appropriate arbitration clause for your case is one of many issues that should be discussed with an experienced contract attorney as you are drafting a contract for the use in your business.

Xander Law Group based out of Miami, Florida is an experienced law firm that has handled many arbitration cases for clients. We not only protect our clients with the proper language when setting up contracts, but also throughout the arbitration process. If you have any questions about how to include arbitration clauses in a business contract or going through arbitration proceedings, contact Xander Law Group, P.A. and we can assist you.