Understanding Arbitration Clauses and Their Role in Resolving Disputes

One of the advantages of having a written contract in place is the alleviation of doubt, and the ability to identify who needs to do what and when. Unfortunately, having an agreement in place does not guarantee that the deal won’t come apart at the seams. But having a written agreement can certainly help you in resolving the issue amicably and to your satisfaction.

Traditionally, the courts have always been the primary port of call when looking to resolve conflict. The problems encountered when taking a matter to court, however, are notorious: it can be cumbersome, expensive and slow. In many cases, an aggrieved party will simply accept the situation and walk away, because the disadvantages of litigation can outweigh the advantages.

There is another method of resolving conflict that has gained in popularity: alternative dispute resolution. There are a number of advantages to using alternative dispute resolution:

  • It usually results in a quicker resolution of the issue.
  • You should find it more cost-effective, as less time and paperwork is required on the part of your legal representative.
  • It protects confidentiality, in that, unlike the courts, the ADR process is not carried out in an open forum.
  • Solutions need not be bound by legal precedent. Thus innovative methods of resolving the conflict can be explored.

Alternative dispute resolution is not automatically available to you. If you want to use this method of resolving any potential conflict, then your agreement with the other party needs to expressly include arbitration as the preferred method of resolving disputes.

An arbitration clause should make provision for:

  • The process to be followed in appointing an arbitrator;
  • Any rules that the arbitrator needs to observe, such as imposing time limits on the process;
  • The arbitrator’s ability to award a costs finding.

In Summary: Arbitration can be a very efficient alternative for the resolution of disputes. But you need to include an arbitration clause in your agreements: don’t necessarily assume that you’re able to use the arbitration process.


Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements