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Arbitration Clauses Becoming More Common

Saturday, July, 27, 2013


 

In more contracts for employment, car sales and many other arenas, arbitration clauses are making a greater appearance.  Part of the reason for this is that arbitration has had success as a form of alternative dispute resolution, giving parties an opportunity to discuss ideas and terms to create final agreements without ever having to go to court.  Arbitration clauses in contracts and agreements lay out the terms under which parties can have disputes resolved; in many cases, these clauses are attempts to avoid litigation which can be costly in both time and expense. 

 

Many businesses are recognizing the opportunity to prevent a high volume of lawsuits by using arbitration as a more effective tool to hammer out disagreements.  The private justice aspect of arbitration appeals to many business owners.  Arbitration is known to reach agreements more quickly and take out some of the tension between disputing parties that is instead fostered in the courtroom environment. 

 

Arbitration has in fact become so popular that a hearing was held in 2013 by the Assembly Judiciary Committee to see how arbitration companies had performed under the law.  Deputy Chief Council of the committee, Kevin Baker, said the hearing was conducted to look at compliance and transparency.  With regards to transparency, the committee found there was room to grow because there is no enforcement mechanism in place.  This could be in part due to the fact arbitration has become popular over a very short period of time, so the structure of the process is growing alongside its popularity. 

 

The committee used their research findings to look at possible laws that would improve the enforcement aspect of arbitration hearings.  Committee members strongly supported innovations that made the process of arbitration more open with clear stipulations for the procedures.  Arbitration will continue to evolve as the process gets used in more and more capacities.