There are two venues for dispute resolution: Court and Arbitration. The default venue is court. However, parties can always agree to binding arbitration. Both parties must agree to arbitration; if not, court is the necessary venue.
Arbitration can be thought of like a very sophisticated conciliation court or a very informal trial court.
The savings of arbitration compared to court may invoke the "penny smart, pound foolish" adage however. The downside to arbitration is:
The inability to fully investigate and uncover the facts. Written discovery, such as interrogatories, can elicit significant information and bind the adverse party to a set of facts. More importantly, depositions are not usually permitted in arbitration proceedings. A deposition is a party's best chance to see the witness perform under pressure and hear the unfiltered story.
The election for arbitration is not always the best choice. I use certain criteria and client input to recommend whether an arbitration agreement is wise to request and include in an agreement. Please contact me to discuss arbitration agreements and whether you should be including them in your contracts.
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