Part of being a small business owner is handling contracts between you, vendors, and customers. Unfortunately, disputes do occur from time to time and it is sometimes best to include arbitration in your contract. If you are thinking of including an arbitration clause, here is what you need to know.

Should You Include Arbitration?

Depending on the state in which your business operates, you might be required to include an arbitration clause in your contracts. If it is not mandatory, whether or not it is included is a personal decision.

There are advantages to including arbitration. For example, arbitration is a more efficient and faster way to settle contract disputes. The time it takes to settle a dispute in court can be considerably longer than it could take to resolve the issue in arbitration.

During arbitration, you have the added advantage of selecting someone to serve as arbitrator who has expertise in the subject being disputed. For instance, if your business is health-care related, you can opt for someone with medical experience as the arbitrator. This differs from going to court where the judge might not be familiar with the specifics of the case.

Should You Avoid Arbitration?

Although there are good reasons to opt for arbitration, there are some disadvantages. One of the biggest disadvantages associated with arbitration is that there is no automatic discovery process. In a court case, both sides are required to share evidence and provide information that is requested by the other side.

However, in arbitration, disclosure is not guaranteed and unless it is specifically written into the contract, you could potentially miss out on receiving information that is needed to prove your case.

Are There Different Types of Arbitration?

There are two types of arbitration. Binding arbitration is one of the more commonly used. In a binding agreement, whatever the arbitrator decides cannot be disputed in court. Even if you receive an unfair decision, you cannot go to court to dispute it.

However, a non-binding arbitration agreement allows you to go to court and dispute the agreement that is setup by the arbitrator. Even if only one party is dissatisfied, a nonbinding agreement can be disputed in court.

Before drawing up a contract, consider working with an experienced small business attorney. He or she can help you decide whether binding or non-binding is best for you and ensure that all of the details necessary are included in your agreement. For more information, contact an attorney in your area.