binding arbitration
Definition
Binding arbitration is a private dispute resolution process where both parties agree to present their case to a neutral third party (the arbitrator) instead of going to court. The arbitrator listens to both sides and makes a final decision that everyone must legally follow, with very limited ability to appeal.
Example
If your contract with a supplier includes a binding arbitration clause, and that supplier ships you damaged goods, you would resolve the dispute through an arbitrator rather than suing them in court.
Watch Out
Many standard business contracts contain binding arbitration clauses buried in the fine print, so you may unknowingly give up your right to a jury trial before a dispute ever arises.
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.