What is the arbitration clause in a contract?
The arbitration clause in a contract is an agreement that outlines how disputes between the two parties will be resolved. It states that instead of going to court, the parties involved will enter into arbitration, which is a form of alternate dispute resolution. In the District of Columbia, arbitration is a legally-binding process in which an unbiased third-party, called an arbitrator, listens to both sides of the dispute and makes a decision based on the evidence presented, rather than a judge or jury. The arbitration clause is generally located in the contract between the two parties and outlines the rights and obligations of each party. Usually, both parties waive their rights to go to court and agree to enter into arbitration and to abide by the decision of the arbitrator. Furthermore, the clause may also detail the process by which the arbitration is to take place, including the rules of procedure, the selection of the arbitrator, the location of the arbitration, and the cost of the process. The arbitration clause is important because it provides a legally binding resolution to disputes quickly and can be less expensive than going to court. It also allows both parties to resolve their dispute without public litigation and a potential court battle which can be damaging to both parties. Additionally, it allows both parties to choose an arbitrator who is knowledgeable about the particular subject matter so that the decision made is based on an expert opinion.
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