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By Ashley Walters*, Law Clerk

You enter into a contract and thereafter a dispute arises. How the dispute is resolved may be part in your contract. Most real estate contracts and more and more business contracts provide for arbitration dispute resolution. Here is a brief overview of the pros and cons to arbitration.

What is Arbitration:
Arbitration is the most traditional and well-known form of alternative dispute resolution. Arbitration can arise in two circumstances. The most common is in the contract formation stage where the parties agree that if a dispute arises, it will be arbitrated. The second way Arbitration is used is by agreement by both parties after a dispute has arisen. When parties submit a dispute to arbitration, they are handing their decision-making power over to an Arbitrator whose decision will be binding on the parties. The arbitrator acts as the Judge and the jury.

 The Arbitrator is generally an impartial but experienced attorney in the field of the dispute or retired Judge selected by the parties. Although the arbitration generally does not take place in a courtroom, arbitration proceedings do have similar formalities as trial.

Pros of Arbitration:

Cost to the parties: Generally, the cost of arbitration will be less than trial.
Expedites resolution process: Trial is usually not set for 12 to 18 months from litigation inception. Arbitrations can take place in as little as 60 days, but usually 9 to 12 months from inception.
Parties have more control: Parties may control the process by making certain decisions regarding the arbitration process and procedures in advance including selecting the arbitrator, agreeing on the extent of discovery, experts, and length of the arbitration hearing.
No Jury: A jury is tough to predict and can easily be led into making gigantic awards to a sympathetic, but undeserving party.
Split the difference: Arbitrators sometimes “split the difference” when making an award, which may not be a desirable solution. They also may be inclined to make a small award to a less-than-meritorious claimant.
Generally not appealable: It is almost impossible to appeal an arbitration award because arbitrations are final and binding. The problem is that an Arbitrator may not follow the law or the facts and if the resulting award is against you, you have no reviewing process.

There are clear advantages and disadvantages to arbitration. In my opinion the main advantage to arbitration is control by the parties and their respective counsel as to scope of discovery and timing of the arbitration hearing. The main disadvantage to arbitration is the finality of the arbitration award and the inability of appeal.

This newsletter is published for the interest of friends, clients and prospective clients of the Law Offices of Jeffrey L. Marcus and should not be relied upon or considered as legal advice.

*Ashley Walters is a law clerk at the firm. She is a third-year student at Pepperdine University School of Law with an emphasis in Real Estate Transactions and Estate Planning. She is a member of the Phi Alpha Delta Legal Fraternity. Before joining the firm, she clerked for a Criminal Law Firm in Virginia.

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