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Dallas Business Lawyer Discusses Arbitration Clauses in Business Agreements

Dallas business lawyer, Richard “Ric” Armstrong, discusses what you need to know about including an arbitration clause in your contracts to safeguard against litigation.

In a society that has become increasingly lawsuit-happy over the years, many companies are incorporating arbitration clauses into their contractual agreements as a way of preventing or deterring litigation. An arbitration clause essentially says both parties agree to resolve disputes through a neutral third-party arbitrator as an alternative to going to court. If you’re considering incorporating this language into your business contracts with employees, vendors, associates or partners, you should look at a few considerations.

Binding or Non-Binding

When crafting your agreement, you can make the arbitration agreement voluntary or mandatory; you can also make the arbitration outcome binding or non-binding. Each has its own pros and cons. A non-binding agreement suggests greater goodwill between parties, but still leaves you open to lawsuits. Binding arbitration affords better protection for your company, but it may also weed out a few potential clients or employees who don’t wish to sign.

What Are the Advantages?

Arbitration clauses hold a number of benefits for Texas business owners, including the following:

Proceedings are private, not public. (Lawsuits become a matter of public record.)
• You get to set the rules of engagement, rather than the courts.
• Disputes are usually resolved more quickly and efficiently. No spending years tied up in the courts.
• Arbitration often results in lower costs. While the cost to initiate arbitration is a bit more expensive than filing a suit, that cost is often offset by quicker resolutions and lower settlements.

What Are the Disadvantages?

Arbitration has a few downsides, as well. Here’s what you need to consider:

  •  You’re bound by the outcome, as well. Arbitration doesn’t necessarily reduce your risk of liability in a dispute—it just places it in a more controlled environment. You may still have to settle financially if the arbitrator deems it appropriate.
  •  Binding arbitration cannot be appealed. Basically, when you submit to arbitration, you agree along with the other party that the outcome is final. No appealing to a higher court if you don’t like the result (which may boil down to not liking the way the arbitrator handled things.
  •  In complex cases, an arbitration can cost as much as trial.  I have been through an arbitration that rivaled trial for expense.  Look carefully at the issues to see if this is a straightforward case, or a factually and legally complex one. You may choose to avail yourself of trial procedures and the right to appeal.

Arbitration agreements may be constructed according to a wide range of options, and a Dallas business lawyer can help you determine which provisions are best suited to protect your company from harmful litigation. To learn more, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297). 

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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297