What is the arbitration clause in a contract?

An arbitration clause in a contract is a provision that requires parties to resolve any disputes through a non-judicial process called arbitration. This process typically involves a neutral third party, known as an arbitrator, who reviews the evidence and arguments of both sides and makes a decision, which is binding on the parties. In Virginia, arbitration clauses are classified as either a "consent arbitration clause," which requires the parties to arbitrate all disputes, or a "non-consent arbitration clause," which allows the parties to choose to arbitration either before or after litigation. Arbitration clauses can be included in contracts to help avoid costly and lengthy litigation, as most arbitrations usually take place within weeks. Additionally, parties are also able to choose their own arbitrator, and thus have more control over the proceedings. In some cases, arbitration clauses can also be used to limit the amount of damages that can be recovered by an injured party, or even to preclude them from recovering certain types of damages. This can be beneficial to both parties, as it helps to ensure that the dispute won’t drag on, and also reduces the financial risk associated with litigation. It’s important to note that a valid arbitration clause must be included in the contract in order for it to be enforced. This means that the clause should be clearly stated in the contract, and both parties should be made aware of its intention and consequences.

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