How to Enforce a Binding Arbitration Agreement
Some contracts include arbitration clauses or agreements. Arbitration is a type of alternative dispute resolution. Instead of resolving a dispute publicly before a judge, parties can argue their cases in front of a third party decision maker. A binding arbitration agreement refers to the decision maker's conclusion, which is final and enforceable.
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Instructions
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Review the arbitration clause to clarify ambiguous sections such as where does the arbitration take place and what law governs. A binding agreement might be unenforceable because it is too vague.
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Place the arbitration clause before the final signature so that the other party cannot claim lack of notice. If you include the arbitration clause at the end or in an addendum, the other party might argue that he was unaware of the clause and therefore, it should not be binding.
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Select a neutral third party arbitrator. A court might vacate an arbitration decision based on fraud, corruption, or partiality. For example, an arbitrator who owns part of your company will not be considered impartial or neutral.
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Compare the arbitrator's decision with existing law. A court can vacate an arbitration decision if there is a a manifest disregard of the law, such as awarding unreasonable amounts.
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Tips & Warnings
Hybrid arbitration combines features of other dispute resolution forms with arbitration. For instance, labor unions usually enforce arbitration provisions related to new contracts. Although your state might impose additional guidelines, the Federal Arbitration Act describes federal law. Organizations such as the World Trade Organization and United Nations maintain dispute resolution provisions, but international arbitration disputes remain difficult to enforce.
You might face obstacles enforcing an arbitration decision against a judgment proof party. For instance, you might not recover anything when a decision requires payment from a bankrupt or dissolved business.
You also might have problems enforcing a binding arbitration clause against an illiterate or disabled person who did not understand the terms. Add a translation of the contract when dealing with non-English speaking adults.
