Learn All About the Arbitration Agreement

Standardized Legal Documents Learn All About the Arbitration Agreement

Understanding the Arbitration Agreement From Top to Bottom

When starting a business relationship, nobody hopes to have disagreements or issues, but the chances are that there will be some bumps in the road. Here’s where the arbitration agreement comes in handy.

This article will break down arbitration agreements and answer any questions you might have. Understanding legal documents and writing contracts seems daunting, but we will guide you along the way.


Arbitration Agreements—The Meaning of Arbitration Explained

Arbitration is a way of resolving disputes without going to court. This process involves parties, their lawyers, and one or more arbitrators who make decisions about disputes.

Arbitration can be:

  1. Binding—The arbitrator’s decision is final
  2. Non-binding—The arbitrator’s decision is advisory, which means it’s only final if the parties accept it

What Is an Arbitration Agreement?

An arbitration agreement is a legal document parties sign to resolve their disputes through arbitration. While an arbitration agreement can be a standalone document, that’s rarely the case. Most often, it’s part of a contract as a clause named Arbitration or Dispute Resolution.

Parties who typically enter into this agreement are:

  • Retailers
  • Investors
  • Business partners
  • Construction companies
  • Employers and employees

What Do Arbitration Agreements Include?

Unlike most agreements, an arbitration agreement is typically short, especially if it’s part of a different agreement (e.g., a bill of sale, a licensing agreement, or an employment agreement).

The most important detail in an arbitration agreement is saying that any dispute that may arise will be resolved through arbitration instead of a lawsuit. Some agreements can be more specific and pinpoint which disputes will be subject to arbitration.

Other parts of the agreement may include:

  • Language of the arbitration
  • Number of arbitrators
  • Attorney representation
  • Remedies
  • Cost of arbitration (e.g., in employer-employee agreements, the employer typically bears the cost)
  • Specific arbitration rules
  • Methods of choosing arbitrators
  • Ways the parties will conduct the arbitration (e.g., with lawyers and witnesses present)
  • Limitations (e.g., certain locations where the arbitration must take place)

Should I Sign an Arbitration Agreement?

Before signing an arbitration agreement, you should consider its advantages and disadvantages. Check out both sides of the (arbitration) coin in the table below:

Pros Cons
  • Cost-effective
  • Less time-consuming than lawsuits 
  • Confidential proceedings
  • Personal choice of an arbitrator
  • Faster compared to court proceedings
  • No jury trial—Arbitration could be considered less fair than litigation
  • Limited exchange of information between parties during the arbitration process
  • Impossible to appeal arbitrator’s decisions in most cases
  • One-sided agreement (e.g., when an employer drafts an arbitration agreement to be more in their favor)

What Happens if I Don’t Sign My Employer’s Arbitration Agreement?

You have the right to refuse to sign an arbitration agreement. If you don’t sign it, your potential or current employer may negotiate with you to come to a fair arrangement. Alternatively, the employer could withdraw the job offer or fire you.

While signing an arbitration agreement means you won’t be able to take your dispute to court, there are still steps you can take besides arbitration. You can turn to a government agency, such as the Equal Employment Opportunity Commission (EEOC). The agency can take the employer to court in your stead. This move may seem like a lot of trouble, but considering the employee win rate is around 30% lower in arbitration than in litigation, you should be familiar with all the options. 

Learn About and Draft Legal Documents With DoNotPay

DoNotPay is your go-to if you need the lowdown on numerous agreements and contracts. Our Legal Documents feature can generate different legal documents for you in a matter of minutes.

All you need to do once you open our app in any web browser is:

  1. Type in the name of the legal document you want to create
  2. Answer a few questions from our chatbot

We will generate an iron-clad contract based on the info you provide us with. Your document will be ready for reviewing and signing right away.

Another perk of using DoNotPay to draft an agreement is e-signing it and faxing it immediately, thanks to our Online Fax feature.

What Agreements Can DoNotPay Create for Me?

Our AI-powered app can be your virtual lawyer and give you the inside scoop on various legal documents and help you draw them up an unlimited number of times. Check out the table below for a fraction of what DoNotPay can do for you:

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