Arbitration
A private dispute resolution method where an impartial arbitrator makes a binding decision.
Arbitration clauses require parties to resolve disputes outside of court through a neutral third-party arbitrator. The process is typically faster and less formal than litigation, though costs can be significant.
Arbitration decisions are usually final and binding with very limited grounds for appeal. Many commercial contracts include mandatory arbitration clauses, though their enforceability varies by jurisdiction.
Example
Two business partners resolve a profit-sharing dispute through arbitration administered by the American Arbitration Association.
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