Understanding Arbitration Agreements: A Guide for Texas Business Owners
Grasping the effect of arbitration agreements is essential for Texas business owners. Many contracts you might encounter will include arbitration clauses. If you’re unsure about the implications of these clauses, you won’t know if signing such a contract is right for your business. Your lawyer should review any significant contracts you plan to sign to assess their legal impact on you.
What Is an Arbitration Agreement?
An arbitration agreement is a contract that requires the parties to resolve legal disputes through arbitration. Often, it is a clause within a larger contract involving a business issue, often buried in the fine print. It’s crucial for you and your lawyer to review all parts of any contract you plan to sign to identify any arbitration clauses.
When you sign a contract with an arbitration clause, you agree to arbitrate disputes related to the contract with the other party. The clause typically outlines the scope of the disputes that must be arbitrated. If a covered dispute arises and you file a lawsuit, the other party can ask the judge to compel arbitration. This works both ways.
What Does Agreeing to Arbitrate Mean?
Arbitration is an alternative dispute resolution method outside the court system. A court can compel arbitration based on a valid arbitration agreement. You can also directly agree to arbitrate your dispute without going to court.
In arbitration, one or more neutral, third-party arbitrators (such as retired judges or experienced lawyers) hear both sides of the dispute. They listen to witness and expert testimony, review relevant documents, and consider arguments from both sides. They then make a decision, which can be confirmed and enforced in court. Arbitration is generally less formal and can be less time-consuming than court proceedings.
Should You Agree to Arbitrate?
Arbitration’s less formal structure and different organization from court proceedings mean there are important distinctions to consider. For example, court procedures follow strict rules listed in Texas or federal laws, whereas arbitrations have their own set of procedural rules. Some of these rules, agreed upon in the arbitration clause, may limit your ability to present your case, such as limitations on witnesses or preparation time.
Arbitration might also have restrictions you may not fully appreciate until attempting to use the process. Numerous federal and state court decisions address arbitration agreements and processes, including industry-specific cases. Court rulings on enforceability can impact whether a case goes to court or arbitration, influencing the dispute’s outcome.
Given the many pros and cons of arbitration, it’s essential to discuss any contract containing an arbitration clause with a lawyer. This is especially important for employee contracts or those significantly affecting your business’s bottom line. You must understand your rights and the limitations imposed by an arbitration agreement. Our firm’s experienced business lawyers can assist with arbitration agreement questions.
Have Questions about Arbitration? Contact Obeta & Associates
As seasoned Houston business lawyers, we help our clients understand the impact of the contracts they sign. If you have questions about an arbitration clause and its implications for your business, reach out to us. Our advice is tailored to your unique situation. To set up a consultation, call (281) 888 5135 or use our convenient Contact Form.
