Arbitration is a form of alternative dispute resolution which is faster and less formal than going to trial, but is more formal than mediation. Arbitration is similar to a trial, but the rules and procedures are scaled back and it is less expensive. In arbitration, a third party, called an arbitrator, decides the outcome based on the evidence and arguments presented by both sides.
Binding and Non-Binding Arbitration
Arbitration can be binding or nonbinding depending on the contractual agreement, the court order, or the agreement of the parties. With binding arbitration, the parties must abide by the decision of the arbitrator. Non-binding arbitration allows you to go to court if you do not agree with the outcome of arbitration.
In some cases, the results of binding arbitration can be appealed. In most cases, however, when you enter into binding arbitration you lose your right to pursue the matter in court.
Many types of contracts contain an arbitration clause in the fine print. Consumers, employees, and others who sign these contracts very often do not understand what they are getting into. When you sign a contract with an arbitration clause you give up many of your legal rights should a dispute or conflict develop. Types of contracts which often contain an arbitration clause include:
- Credit card
- Health insurance
- Phone service
- Vehicle financing
- Home repair
- Cruise tickets
- Ski tickets
An arbitration clause may dictate more than just the fact that you dispute must be settled through arbitration. It can also dictate where the arbitration will take place, and much more.
Arbitration is similar to a trial, but more informal. An arbitrator or panel of arbitrators hears the case. The rules and procedures are simplified which can save you considerable time. Scheduling and locations are far more flexible because arbitration takes place outside the courtroom and arbitrators are more accommodating.
Both parties get the chance to tell their sides of the story, present evidence, call witnesses and cross-examine them. The arbitrator decides the outcome based on the evidence and arguments presented, but does not face the same rules and limitations as a judge when making a decision.
Judges are bound by law to make certain decisions for certain reasons and to choose outcomes based on strict legal guidelines. Arbitrators are not bound by these restrictions and have more leeway to make decisions based on what they feel is right. It is very difficult to fight an arbitrator’s decision, but there are certain extreme circumstances, such as fraud, corruption, or bias, which give you the right to appeal.