arbitration
Definition
Arbitration is a way of resolving a dispute outside of a courtroom, where both sides present their case to a neutral third party called an arbitrator, who then makes a binding decision. Think of it as hiring a private judge to settle a disagreement faster and more cheaply than going through the court system. Many business contracts require arbitration instead of lawsuits, so you may already be signed up for it without realizing it.
Example
If a customer claims your company damaged their property and your contract includes an arbitration clause, you would both present your evidence to an arbitrator rather than fighting it out in court in front of a judge.
Watch Out
Once an arbitrator makes a decision, it is almost impossible to appeal, so you are largely stuck with whatever they decide even if you believe the outcome was unfair.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.