Agreement To Arbitrate: Is It Right For You?

Posted in arbitration by Nick Hansen on February 5th, 2017

Often when you’re involved in a dispute regarding a breach of contract, time is of the essence. When an expedient solution is needed, arbitration may be a better solution than litigation.  However, arbitration is not right for all situations, and in some instances, may not be the most affordable way to reach a solution.  In addition, before arbitration can be undertaken, arbitration must be specifically provided for in the contract at issue, or all parties to the dispute must reach an agreement to arbitrate to resolve their dispute.

Should you agree to arbitrate your contractual disputes?  Here are a few pros and cons to help you decide.

The Good About Arbitration

arbitrationLet’s start with the positives. As previously stated, arbitration is often a faster way to reach a resolution, especially when all parties to the dispute agree that a quick resolution is needed.  In arbitration, the parties to the dispute are basically hiring a private judge so if the parties to the dispute are in agreement, they can usually succeed in requesting the private judge to resolve their dispute on the timetable agreed upon by the parties.  In Colorado, the Federal Court system is much slower than the State Court system.  Thus, if one would otherwise find themselves in Federal Court, arbitration becomes an even more attractive choice in situations in which time is an important factor.

Arbitration also allows the parties some input into who the decision maker will be regarding the resolution of their dispute.  Thus, if the parties agree, they can, for example, have an expert on the topic in dispute serve as the arbitrator or at least one of the arbitrators.  This can be helpful when a highly technical issue must be resolved.

Arbitration proceedings are not open to the public.  As a result, they are a more private alternative to litigation. This can be especially beneficial in cases in which the contract in question reveals private information (for example, trade secrets) that you do not want disclosed to the public.

The Bad When Agreeing to Arbitrate

The cost of initiating arbitration is higher than the cost of filing a lawsuit.  In addition, in arbitration, the parties are required to pay for the time spent by the arbitrator(s) to hear and resolve the dispute.  In litigation, the taxpayer pays those costs.

You lose your right to a jury when you reach an agreement to arbitrate.  Thus, all facts in dispute are decided by one person (the arbitrator), who is usually a lawyer and/or former judge, and not a jury of your peers.

When a final decision is made in an arbitration proceeding, your recourse is limited.  If the arbitrator reaches a decision that you feel is unfair, it may be impossible to air the underlying claim in court, and you may be forever stuck with the decision.

An arbitrator is often thought to be more likely to “split the difference.” This means that it is entirely possible for the decision reached to not satisfy the wants or needs of either party involved.

Contract Dispute Arbitration

If you’re involved in a contract dispute, agreeing to arbitration could be an expedient and effective way to reach a resolution.  However, it is by no means necessarily the best solution for all disputes.  It is highly recommended that you take the time to discuss with an experienced contract formation services lawyer whether your contract drafting should include a provision in your contract that requires arbitration in the event that a dispute arises or whether, when presented with a choice, you reach an agreement to arbitrate.  For your free initial consultation and help deciding whether you should arbitrate your contractual dispute, please call 303-720-7566 now. Take a look at what we have been able to do for others in our recent legal victories.

Back to Blog