Arbitration is a legal process of settling disputes between two parties outside of the courtroom. An arbitration agreement is a contract signed between two parties, which sets out the terms and conditions of the arbitration process.
The law governing arbitration agreements comes from the Federal Arbitration Act (FAA) of 1925, which governs the use of arbitration in disputes between parties in the United States. This law has been amended several times over the years, but the basic principles of the FAA remain the same.
The FAA was created to encourage the use of arbitration as an alternative to litigation, recognizing that it would be more cost-effective and efficient for parties to resolve disputes outside of the courtroom. The FAA aims to create a balanced approach to arbitration agreements, ensuring that they are legally enforceable while still providing adequate protection for the parties involved.
One of the most important provisions of the FAA is the requirement that arbitration agreements be in writing. This means that both parties must agree to the terms of the agreement and sign a written document that specifies the terms and conditions of the arbitration process.
Another key provision of the FAA is the requirement that arbitration agreements be binding on both parties. This means that once a decision is made in arbitration, both parties must accept the decision and abide by it. There are only limited circumstances where parties can challenge the decision in court, such as on the basis of fraud or misconduct.
The FAA also includes provisions that address the role of the courts in arbitration agreements. Courts can still be involved in enforcing arbitration agreements, but their role is limited to ensuring that the agreement is valid and the arbitration process is being conducted according to the terms of the agreement.
Overall, the law governing arbitration agreements seeks to provide a fair and efficient way of resolving disputes outside of the courtroom. By encouraging the use of arbitration, the law helps to reduce the burden on the court system and provide a more cost-effective way for parties to resolve their differences. If you are considering entering into an arbitration agreement, it is important to seek legal advice to ensure that your rights are protected and the agreement is legally enforceable.