The purpose of placing an arbitration clause in a contract is to streamline the resolution of any disputes under the agreement. Alternative dispute resolution (ADR) avoids the time, cost and uncertainty of litigating in court when a dispute arises. In drafting an arbitration clause, the goal is make the clause itself clear and to the point. The last thing you want is to have disagreements over the interpretation of the arbitration provision itself. That would defeat the purpose of same with the result of litigating the meaning of the clause itself. This is a brief synopsis of some of the items that should be considered when drafting the arbitration clause. A general observation is that specificity is a must.

In the first instance the parties should decide the types of disputes that should be subject to arbitration. Do you want a provision that encompasses any and all disputes, or are there certain areas of disagreement that you want to retain the right to litigate in a court of law? There are no simple answers to these questions. In some circumstances, you may want to reserve your rights to litigate certain disputes in a court of law with the right to appeal any adverse decisions. For simple disputes under the agreement, consideration may be given to a streamlined ADR process where the amounts of potential damages are limited.

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