Definition & Meaning:

Arbitration is a method of resolving disputes outside the courts, where the parties to a conflict agree to be bound by the decision of an impartial third party, known as an arbitrator.

This process is often chosen for its confidentiality, speed, and cost-effectiveness compared to traditional litigation. This can be particularly beneficial for resolving commercial disputes, where maintaining a business relationship is important.

The arbitrator’s decision, called an award, is final and can be enforced in court, similar to a court judgment.For example, if two companies have a disagreement over the terms of a contract, they might choose arbitration to find a resolution.

They would present their evidence and arguments to the arbitrator, who then makes a binding decision.

Arbitration clauses are commonly found in contracts, including employment contracts, service agreements, and terms of service for websites and software.

This clause specifies that any disputes arising under the contract will be resolved through arbitration rather than through court proceedings. One of the benefits of arbitration is the ability to select an arbitrator with specific expertise relevant to the dispute.

This is particularly advantageous in technical or specialized fields where a detailed understanding of the subject matter is essential for a fair resolution.

However, it’s important to note that by agreeing to arbitration, you may waive certain rights, such as the right to a trial by jury and the ability to appeal the decision.

For this reason, it’s essential to carefully consider the implications of arbitration clauses before agreeing to them.