When entering into a contract, it is important to include an arbitration clause to protect both parties in the event of a disagreement or dispute. Arbitration is a process where a neutral third party (arbitrator) is chosen to make a final decision on the dispute. This is typically a faster and less expensive alternative to going to court.
Here is a sample contract arbitration clause:
Any dispute arising out of or relating to this contract, including its formation, interpretation, performance, or breach, shall be settled by arbitration administered by the [name of arbitration association] in accordance with its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
This clause clearly states that any disagreement related to the contract will be settled through arbitration, and specifies the arbitration association that will administer the process. It also indicates that the decision made by the arbitrator is legally binding and can be upheld in court.
Including an arbitration clause in a contract can provide several benefits. It can save time and money by avoiding the lengthy court process. It can also provide a level of privacy as the arbitration process is typically confidential. Additionally, it allows the parties to choose an arbitrator with expertise in the field related to the contract, providing a more informed and fair decision.
However, it is important to note that in some cases, arbitration may not be the best option. For example, if a party feels that the other is acting in bad faith or if there is a significant power imbalance between the parties, it may be necessary to seek resolution through the court system. As such, it is important to consider the circumstances and potential risks before including an arbitration clause in a contract.
In conclusion, including a contract arbitration clause is a wise decision that can provide numerous benefits for both parties involved. By utilizing a sample contract arbitration clause and ensuring that both parties fully understand the implications, you can protect your interests and ensure a fair resolution in the event of a dispute.