Should I include a mandatory arbitration clause in my business contract?

Arbitration is a way to resolve any disputes outside of the court system. Over the years, as court dockets have become impacted, arbitration clauses have become more popular in commercial contracts. By agreeing to binding arbitration parties agree to abide by the decision of one or more chosen neutral parties. The solution imposed is thus legally binding and does have the ability to be enforced in a court.

Arbitration In South Carolina

Arbitration has a long history in South Carolina, dating all the way back to the late 1700s. Throughout the last decade, the South Carolina Supreme Court has ruled on several decisions concerning the enforcement of arbitration agreements, and has generally ruled in favor of any agreements.

An experienced commercial contracts lawyer will serve as a valuable asset if you are considering an arbitration case, or if you are drafting a business contract. They will be able to review the requirements of South Carolina law and be able to give you the guidance you need to decide if a clause is desirable and what it should say.

Why Should I Include A Mandatory Arbitration Clause?

Arbitration clauses in business contracts have been regarded as an easy way to avoid formal litigation. Formal litigation is usually somewhat time consuming and an arduous process for everyone involved.

Arbitration is useful when:

1. A degree of privacy is needed: Arbitration cases are confidential, which means trade secrets are easier to protect and any judgment or award is not disclosed to the public.

2. Time is of the essence. In jurisdictions where the dockets are full, cases may not be resolved for years. If you are interested in having your issue resolved in the most expedient manner possible, arbitration may be an attractive option.

Why Shouldn’t I Include A Mandatory Arbitration Clause?

One situation in which you might want to avoid a mandatory arbitration clause is if the arbitration is non-binding. Imagine presenting your case, with countless exhibits and witnesses over several days or weeks of arbitration proceedings, winning an arbitrators award and then being sued in court when the other party is unhappy. Why would you want to try your case more than once?

Another thing to consider is that most cases settle out of court. If you are forced into arbitration, you will have to provide a significant amount of money to the arbitrator to start the case, which in complex commercial litigation can be in the tens of thousands of dollars. In contrast, filing a case in South Carolina State Court will typically cost less than $1,000.00. Parties are more likely to settle if the initial financial outlay is modest. If significant money has already been paid in arbitration, there is less incentive to settle early.

Thinking of Arbitration?

Willcox, Buyck & Williams, P.A. serves individuals and organizations involved in a wide array of legal transactions and disputes. Our attorneys regularly assist clients in drafting and negotiating business contracts and can assist you in determining whether an arbitration clause is right for you. Contact us today to schedule your free initial consultation by calling us in either of our offices in Florence at (843) 536-8050 or Myrtle Beach at (843) 461-3020.