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What is Arbitration?

Arbitration is a type of alternative dispute resolution (ADR) that is often used to resolve contract disputes. These disputes can be between an employer and employee, a company and its vendors or contractors, between partners in a company or shareholders and the company’s owners, or any other pair or group of parties connected by a contract. Generally, arbitration is used to resolve business disputes because it allows the parties involved to retain a high level of control over the settlement process and gives them the opportunity to negotiate with each other, rather than ceding control to a judge and jury as they would if they resolved their dispute through litigation.

How Does Arbitration Work?

Unlike litigation, arbitration hearings do not occur inside a courtroom. Instead, they are heard in settings like offices and conference rooms.

Usually, a contract states how an arbitrator is determined, such as from an association such as the American Arbitration Association or the National Arbitration Forum. The arbitrator is the party that makes the final judgment about the dispute. The arbitrator may be one person or a panel of individuals, who may be given a deadline by which to submit their final ruling. An arbitrator is not governed by the rules that govern judges, which means that they are not bound to follow any specific laws. Instead, arbitrators must make rulings that they deem to be fair given the circumstances presented during the arbitration hearing.

During an arbitration hearing, both parties involved in the contract present their evidence and testimonies regarding the dispute. The goal here is to show that a contract breach occurred, how it occurred, and how the breach caused one or both of the parties to suffer, whether the suffering was financial, physical, or through a damaged reputation. Each party might present a closing statement, depending on the rules laid out in the contract. This statement is made to cover any points that were not touched upon during the hearing in an effort to sway the arbitrator to rule in the party’s favor.

After the hearing, the arbitrator makes their decision and submits it to the parties in writing. In most arbitration agreements, the arbitrator’s decision is final and legally-binding except for in extreme cases, such as cases where the arbitrator is found to have a bias or exceeded their power. In other cases, the contract specifically states that either party may appeal the ruling reached through arbitration. When you are asked to sign a contract that includes this type of clause, discuss it in detail with your lawyer to determine your rights and options before a dispute arises.

Work with a La Crosse Business Lawyer

When you sign a contract, the contract usually includes a clause about how any disputes regarding the contract are to be resolved. In many contracts, this clause stipulates that arbitration is to be used. Whether you resolve your contract dispute through arbitration or any other means, it is important that you work with an experienced business attorney to protect your rights and interests. Contact our team of La Crosse business lawyers at Moen Sheehan Meyer, Ltd. today to set up your initial consultation with a member of our team.

Published May 11, 2016
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