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Arbitration agreement: The 4 biggest legal dangers for business


If you’re reading as a business owner or as an independent individual to know about the ins and outs of an arbitration agreement, you’ve come to the right spot. There’s no running away from the fact that an arbitration agreement has become the ‘go to’  for most modern businesses when they want to have a dispute settled between them and the other party.

So whether it comes to mandatory arbitration or any other method to solve a dispute, it is always wise enough for everyone to weigh the pros and cons of the arbitration agreement process. Here, we will guide you through some interesting pros and cons of the arbitration process:


Pro: it is not important to hire an attorney to breathe life into any claim. Furthermore, arbitration isn’t expensive, so business owners are happy to work within a certain budget. This process isn’t time-consuming, so attorneys can easily collaborate with the parties involved and make them come together on common grounds. This way, they don’t have to invest a lot of time in fighting and can get things sorted out fast at a low cost.

Con: Although it is not mandatory, most parties are expected to be represented by an attorney.  Therefore, one might end up hiring a lawyer who charges too much. Bear in mind, the court filing fees are nominal when arbitration is filed.  However, when the arbitrator will be hired, both parties might have to pay them around $1500 per day according to the service.

Decision Maker

Pro: the most intriguing part about the arbitration process is that the parties get to choose the arbitrator. For example, if you want somebody who has prior experience of negotiation cases in the real estate sector, you will find a person who specializes in this regard. Similarly, if the parties do not rest assured about the veracity of services of any particular arbitrator, they can consider hiring someone else.

Con: unlike the arbitration process, the people in the jury members don’t have any strong background as a general contractor or an architect. Unfortunately, in the arbitration process, the person selected is often from the construction sector or has experience of working as a general contractor. This gives birth to a bias that might have a negative impact on the final decision. For this reason alone, the general contractors often have to struggle with the selection of an individual as an arbitrator.


Pro: after the parties have been consulted in detail, the arbitrator will set, time, date, and venue for the hearing. A typical arbitration will last for 6 months and seldom will cross the 7thone. After the initial demand of the issuance, the court starts to work on the case. However, if neither of the party’s claims exceeds $75000, which is a minimal amount, the court might summon the hearing within the first 30 days.

Con: in contrast, a lawsuit takes between 9 to 12 months from the initial filing of the case. However, a lawsuit opens up several opportunities for the court to make the final proceedings. If the case doesn’t gravitate in the right direction, it could possibly be slanting towards a weaker claim or a dismissal altogether.


Pro: Because the evidence rules do not apply in the arbitration process, it takes less time to finish and is not costly. As soon as your case goes on trial, you can expect it to get finalized in a short time instead of struggling with collecting and finding evidence. No wonder, if the evidence would have got involved, the process would have had to get stretched far.

Con: Even if a third party isn’t expected to join a legal proceeding, they can still confront your case in the courtroom. Likewise, a third party also stands a chance to confront the witnesses with what they say and claim. However, in the courtroom, any kind of damage must be proved with strong evidence. On the other hand, during the arbitration process, the damages could be based on conjecture or speculation as well. This is one of the reasons why many business owners choose to agree to a settlement with the other party instead of languishing in the courtroom.


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