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Arbitration and contract disputes

On Behalf of | Feb 18, 2022 | Business Law |

New York businesses regularly enter into contracts, and they will face issues from time to time with respect to all parties fulfilling established obligations. Disputes can stem from potentially any type of business agreement. There are two primary options other than litigation when disagreements arise, with those being mediation and arbitration. Mediation can be effective in some instances, as it is not a formal proceeding and there is no public access to the information discussed. However, sometimes arguments are clear to all involved parties and the only avenue to settling the matter outside of litigation is arbitration. In fact, many business contracts require it to settle disputes.

Understanding arbitration

Arbitration is a formal legal procedure where both sides present their arguments in writing to an experienced independent contract dispute arbitrator. The arbitrator will look at the contractual obligations of each party and apply the law across the board based on the material case facts. The final order cannot be appealed by the losing party.

Advantages and disadvantages

Arbitration does not work well for all parties to a contract dispute, as there is typically a loser and a winner in the matter. The formal nature of the order without the potential of an appeal settles the issue from a legal perspective. Arbitration is also a public record hearing, so the details of the case could easily become public knowledge. This result alone can present serious public image issues for some parties.

There are effectively only two types of arbitration. Voluntary arbitration is when all parties agree to the ADR method. Compulsory arbitration is when it is required by an existing contract designating arbitration as the only method of dispute resolution.