Arbitration Clause
Definition
An arbitration clause is a provision that requires the parties to resolve any disputes through arbitration rather than litigation. This usually means settlement of disputes outside courts. Arbitration is a form of alternative dispute resolution where a neutral third party (the arbitrator) hears the dispute and makes a binding decision.
Examples of arbitration clauses in contracts
Consumer Contracts: In many service agreements, such as telecom contracts or credit card agreements, companies include arbitration clauses to require customers to resolve disputes out of court.
Employment Contracts: An employer may include an arbitration clause in employment contracts to resolve any workplace disputes, such as discrimination claims, through arbitration instead of lengthy and costly court proceedings.
Arbitration clauses are often included to reduce legal costs and expedite the resolution process.
