Arbitration Clause in Agreement to Sell
Arbitration Clause in Agreement to Sell: Understanding the Pros and Cons
When entering into a contract to sell a product, it`s essential to include an arbitration clause. This clause provides a mechanism for resolving disputes that may arise during and after the transaction. Arbitration is a process where an impartial third party hears the case and makes a decision that is binding on both parties.
Pros of an Arbitration Clause:
1. Confidentiality – Arbitration proceedings are private and confidential. This means that the parties involved can keep their dispute out of the public eye, and all information discussed during the proceedings is kept confidential.
2. Cost-Effective – Arbitration is usually less expensive than litigation. It`s a faster and more efficient process, which means that the parties involved can save a lot of money in legal fees.
3. Expedited Process – Arbitration proceedings are usually faster and more streamlined than court cases. This means that the parties involved can resolve their dispute more quickly and get back to their normal business.
Cons of an Arbitration Clause:
1. Limited Appeal – The decision made by the arbitrator is final. There is no appeal process, which means that both parties are bound by the decision, even if it`s not in their favor.
2. Limited Discovery – Discovery is the process where both parties can request information and documents from each other. In arbitration, the discovery process is limited, which means that there may be crucial information that is not available to either party.
3. Limited Precedent – Arbitration decisions do not create legal precedent. This means that the decision made in one arbitration case does not necessarily have to be followed in another case involving similar issues.
How to Draft an Effective Arbitration Clause
When drafting an arbitration clause in an agreement to sell, it`s essential to consider the following:
1. Define the scope of the arbitration – Clearly specify the issues that can be resolved through arbitration.
2. Choose an arbitration provider – The parties involved should agree on an arbitration provider that they both trust to handle the proceedings fairly.
3. Determine the location of the arbitration – The parties involved should agree on the location of the arbitration proceedings.
4. Choose the number of arbitrators – The parties involved should agree on the number of arbitrators that will hear the case.
In conclusion, including an arbitration clause in an agreement to sell is crucial for resolving any disputes that may arise. It`s essential to understand the pros and cons of arbitration and draft an effective arbitration clause that balances the interests of both parties.
