What is an arbitration clause?
top of page Answer 2. A boilerplate arbitration clause is contained within virtually every brokerage agreement. This clause basically requires that you resolve any disputes you might have with your broker, investment advisor and/or financial planner through binding arbitration rather than through the State and/or Federal Court system.
Construction contracts often contain arbitration clauses. Arbitration is a form of alternative dispute resolution (ADR). It is a way to settle disputes outside, or instead of, a civil lawsuit. Federal law supports and encourages arbitration as an alternative to civil lawsuits. Arbitration can be an effective, efficient way to resolve differences when parties to a contract have major disputes that they just cannot resolve on their own. It is important that you understand the terms of all parts of your contract, and it is particularly important for you to fully understand and agree with the terms if an arbitration clause is in your contract. For example, you need to know: • Who will be the arbitrator(s)? • How do I know that the arbitrator will truly be neutral—not favor one side or the other? • What will the arbitration cost be? • What rules will be used if the parties must arbitrate their dispute? Arbitration clauses are a little bit like a pre-nuptial agreement in a marriage. It spell
