Benefits of a Mediation and Arbitration Clause

Contract on table with a pen on the paper

When going into a business agreement, one of the most important documents to make the arrangement legal is a contract. A contract usually includes key information such as each party's obligations, what information each party will have access to, and how the contract can be terminated. A contract should also layout how any dispute of the agreement should be handled. In particular, it is beneficial for businesses to include a mediation and arbitration clause for this part of the contract.

Defining a Mediation and Arbitration Clause

Mediation is a process of dispute resolution in which a neutral third party facilitates communication between the parties and helps them reach a mutually agreeable solution. Arbitration is a similar proceeding where an arbitrator, chosen by the parties or appointed by an agreed-upon authority, hears each party's arguments. The arbitrator then makes a binding decision on the disputed issue.

Benefits of This Clause

Having a mediation and arbitration clause in a business contract benefits all parties.

Avoiding Court

A mediation and arbitration clause provides a way for the parties to resolve their differences without going to court. This can save time and money and avoid the potential stress of a trial.

Along the same lines of being less stressful, the mediation process can be less formal and more flexible than arbitration and it can allow the parties to come to an agreement that is satisfactory to both of them.

Neutral Party

An arbitration clause can be used to choose an impartial third party to hear the case and make a decision, which can be helpful if the parties do not trust each other or if they feel that they will not be able to agree on their own.

Drafting a Well-Rounded Business Contract

When drafting and finalizing a business contract, it’s essential to have specific language and information to ensure the agreement is valid and enforceable. If you have questions about a current business contract or want assistance drafting a business contract, the lawyers at Purdy & Bailey, LLP are here to help. Our knowledgeable business contract attorneys have drafted contracts for various industries and are ready to work for you.

Reach out to our dedicated employment law group today. (858) 360-7080

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