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  • Writer's pictureCook Tillman

What to consider before including arbitration clause in contracts

Contract disputes can cause major problems for business owners across Tennessee, whether relationships, projects or sensitive information are at stake.

As such, business owners often go to great lengths to prevent disputes and minimize the fallout of one. One option that is gaining traction with owners across the U.S. is to include an arbitration clause in various business contracts. In this post, we will take a closer look at what these clauses do and why you may or may not choose to include one in a contract.

What is arbitration?

When both parties agree to an arbitration clause, they are agreeing not to litigate a dispute and instead go through arbitration.

There are a number of differences between litigation and arbitration that can make one seem like a better option than the other.

Arbitration proceedings include an arbitrator instead of a judge. They are typically private whereas courtroom trials are public. Arbitration is less formal than litigation. Arbitration rulings generally cannot be appealed, while cases that go through litigation can be appealed. Further, arbitration can result in lower awards than litigation.

Weighing the benefits and drawbacks

A business owner must consider these benefits and drawbacks when deciding whether to include this clause in a contract or not. There are other factors to think about as well.

For instance, if you want to avoid controversy, you might choose to arbitrate disputes with other businesses with whom you enter a contractual relationship, but not with employees in light of current legal battles over arbitration and an employee’s rights.

Making the right decision for your company

Whether you decide to include arbitration clauses in your contracts or not can be a complicated matter. In order to make the decision that is in the best interests of your company, it can be a good idea to discuss your options with an attorney.

In fact, an attorney can be a valuable resource whether you are considering arbitration clauses, creating a business agreement or enforcing the terms of an existing contract. With legal guidance and support, you can prioritize the interests of your company and seeking a fair resolution to disputes that arise.


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