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How does forced arbitration work?

Though many businesses are phasing them out, arbitration clauses are still a feature in some contracts. They require both parties to seek resolutions to any contract disagreements by using alternative dispute resolution methods rather than litigating the matter in court. The decision reached in arbitration is legally binding, and there is typically no alternative for an appeal. If you encounter an arbitration clause in a potential contract, it's important to have clarity about how they work.

How is arbitration different from litigation?

Both mediation and arbitration allow you and your opponent to bring your case before a neutral third party. However, the difference is that in mediation, you and your opponent work out a compromise while the mediator facilitates your discussion. An arbitrator, on the other hand, hears the evidence from both sides and renders a binding ruling. There is a lot at stake in arbitration, so it is important to find an arbitrator who is certified, skilled and fair.

The process of arbitration proceeds much like a trial, although less formally. Each side presents evidence and has an opportunity to support and defend his or her argument. Some ways in which arbitration differs from a trial include the following:

  • The parties involved choose who will hear your case instead of presenting to an appointed judge.
  • Arbitration offers very little time for discovery.
  • You will likely have one hearing before the arbitrator, depending on the complexity of the case, so you must be ready with concise and streamlined evidence.
  • The arbitrator decides the kind of evidence you will present and when he or she has heard enough to make a ruling.
  • You will receive a notice in the mail explaining the decision of the arbitrator.
  • Unlike litigation, arbitration is a private matter, so whatever happens in arbitration cannot be made public.

While some aspects of arbitration can be beneficial, others can lead to unforeseen difficulties for both parties. If you are considering an arbitration clause for one of your contracts--or are faced with signing a contract that has one--it's important to understand the full implications of doing so. The best way to know what will work for you is to seek professional advice. A skilled South Carolina business attorney can provide that assistance.

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