Arbitration agreement

Arbitration agreement

11-Aug-2021 | Article by Legal White Official

Arbitration agreement is very common these days, you will find it in almost all the business dealings and transactions. Almost all the employee – employer contract has an arbitration agreement in it. Before we go ahead and discuss about arbitration agreements, it is important to understand the law of arbitration. Arbitration is process of resolving dispute without filing a case in a court. It was passed by the Indian government in the parliament in the year 1996. The law came to be known as Arbitration and Conciliation Act 1996. This was also amended in 2005 to make it more effective and result oriented.

Arbitration is a process in which the disputing parties can appoint an arbitration with mutual consent to solve the dispute instead of going to the complex and lengthy court procedure. Usually arbitration is cheaper and quicker when compared with the process of litigation. Arbitration was also introduced to unburden the Indian judiciary. After the inception of the law, it gained popularity and one may see arbitration clause or agreement in almost any transactions e.g. while buying a software, contract between employer and employee, contract between two or more companies etc. The government also encouraged and pushed the organizations to include arbitration clause or agreements in their contracts.

As for the arbitration agreement or more commonly called as arbitration clause, it is section of a contract between the concern parties, stating that in case of a dispute, the dispute will be resolved by the means of arbitration. The arbitration clause is usually signed before the start of business relationship. The section of arbitration agreement in a business contract is usually mentioned towards the end of the contract under the heading, arbitration or arbitration clause or dispute resolution. In case of an employee contract, the agreement can be mentioned anywhere in contract.

Arbitration agreement can mention varied points. These are generally the points which are agreed upon before the start of the business relationship. The most important point stated in the agreement is that, both parties will resort to arbitration only in case of a dispute in future. It may even mention that, in case the arbitration fails to yield any results, then only the parties can move to courts. It has been seen in some of the business contracts, that the names of arbitrators are also mentioned in the agreement. This is done because large companies have their preferred arbitrators which they deem fit for any dispute which may arise in future. The parties in contract are free to write any condition which is mutually agreed upon by them. It has been observed that, some of arbitration agreements are often not very clear in terms of the its understanding, one must ensure that, each and every point in clear before signing it as it will ensure in dispute resolution in future.

It must be mentioned that, there are advantages and disadvantages of the arbitration agreement. It is important to weigh in all the aspects before selecting this process. Arbitration is a very significant tool for dispute resolution, however it is a paramount task to understand all the pros and cons before indulging in it.

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