When there is a dispute between two parties, the standard route is often the law system. However, there is a much better alternative, especially if you’re in the real estate industry.
The other resort is binding arbitration, which employs a third party known as the arbitrator that helps hear, consider, and decide the dispute. When there is a breach in contract, people often utilize to their attorneys.
But this alternative has proven to be better and tends to resolve disputes faster, especially on the already agreed resolution. Before we forge ahead, a quick definition of what binding arbitration is.
What Is Binding Arbitration?
Contrary to the court system, there is no standard rule to follow for as long as binding arbitration is at play. Whatever that must be done has to be in the provision of the binding arbitration, and there is often no right to appeal.
In this alternative, the decision of the arbitrator or arbitrators cannot be appealed. A common reason why people adopt this method is its inexpensiveness and fast response. However, that doesn’t mean you wouldn’t pay a dime, as the parties involved might spend thousands of dollars in the long run.
Also, the wait is another factor to consider, as it might take time depending on the issue on the ground.
- Consistency Is Key
If you’re going to be running numerous contracts with different binding arbitration clauses, the chances are that inconsistencies may be inevitable. When this happens, it points out that there was no mutual understanding between the parties or ‘meeting of the minds.’
If you’re going to use more than one contract, ensure that it contains the binding arbitration. There is no room for inconsistencies if this alternative must go smoothly and perfectly.
- Include Important Terms
Arbitration clauses have to cover the arbitration material to avoid the court or arbitrator filling the gaps. In your arbitration clause, it should be bold whether the submission of a dispute to arbitration is optional or not.
Also, it needs to be stated what dispute will be arbitrated and the rules that will govern the arbitration. That is not all, as there are lots of things to consider in a binding arbitration clause, such as the place of arbitration, whether emergency relief is optional or not, and much more.
Having the right terms in your real estate contract will ensure you don’t find yourself at loose ends.
- Avoid Unfair Arbitration Clause
The arbitration clause has to benefit both parties involved in the contract, especially in a consumer contract. It should be fair and not in favor of any party. Some of the unfair situations could be limiting the right of the other party’s bargaining power.
When one party has too much control over the contract proceedings, it can be termed unenforceable by the law or an arbitrator.
Conclusion
It is crucial to ensure that your practitioner includes a severability clause so that the court will not find the arbitration unenforceable. Going this route is often to save cost and time, which is a good thing when drafting an effective binding arbitration clause.