Many contracts that are in existence have mandatory arbitration clauses within them. A mandatory arbitration clause requires the parties to arbitrate any dispute that arises out of the contract. Before you sign such a contract you should understand the differences between arbitrating a dispute as opposed to filing a lawsuit and having the case tried before a judge or a jury.
Arbitrations are typically conducted by a single arbitrator who is either appointed under the terms of the contract or is agreed to by the parties. That arbitrator is entitled to be paid a fee. That fee may well exceed the legal fees that you incur in terms of arbitrating the matter. The largest arbitration association in the United States is the American Arbitration Association which has a very defined set of rules and has a number of approved arbitrators that the parties can agree on.
The reason that arbitration clauses appear in contracts is because most businesses do not want disputes between consumers litigated before a local jury. They would prefer to have it decided by an arbitrator which then removes from the case the unknown variable that exist when a case is presented to a jury.
If a case is presented to a jury for resolution, then the jury typically has a great deal of discretion as to how they decide the case.
Arbitration proceedings are sometimes touted as being less expensive than court trials. That is not necessarily the case. Sometimes the fees paid to the arbitrator can equal or exceed the legal fees that may be incurred by either party in terms of litigating the matter.
As such, you need to think long and hard before signing a contract that requires mandatory arbitration or otherwise agreeing to arbitration.
See Brien Roche’s book Law 101 published by Sphinx Publishing for more information on this subject.
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For more information on arbitration see the pages on Wikipedia.