Arbitration Agreement Stay Proceedings: Understanding the Basics
If you`re a business owner, you may have come across the term “arbitration agreement stay proceedings” in your contracts. It`s a provision that allows parties to resolve their disputes outside of court through arbitration. But what exactly does it mean and how does it impact your business?
What is an Arbitration Agreement?
An arbitration agreement is a contract provision that requires parties to resolve their disputes through arbitration instead of going to court. In arbitration, a neutral third party (the arbitrator) listens to both sides of the dispute and makes a decision that is binding on both parties. Typically, arbitration is less formal and less expensive than going to court.
What is a Stay of Proceedings?
A stay of proceedings is a court order that suspends a case temporarily. In the context of an arbitration agreement, a stay of proceedings means that the court will not hear the case while the parties go through arbitration.
Why Have an Arbitration Agreement Stay Proceedings Provision?
Having an arbitration agreement stay proceedings provision in your contract can provide several benefits:
1. Privacy: Arbitration proceedings are usually confidential, which means that your business`s sensitive information will not become a matter of public record.
2. Cost: Arbitration is typically less expensive than going to court because it is less formal and the parties can agree on the arbitrator`s fees.
3. Time: Arbitration is typically faster than going to court because there are usually no appeals and the arbitrator`s decision is final.
4. Control: By agreeing to arbitration, the parties have more control over the process and the outcome of the dispute.
How does an Arbitration Agreement Stay Proceedings Provision Work?
If there is a dispute between the parties, the party that wants to initiate arbitration sends a notice of arbitration to the other party and files a request for arbitration with the arbitration provider. The parties then select an arbitrator, who will hear the case and make a final decision.
If one of the parties files a lawsuit in court, the other party can ask the court to stay the proceedings and enforce the arbitration agreement. If the court agrees, the case will be put on hold until the arbitration is completed. Once the arbitration is completed, the arbitrator`s decision is binding on both parties.
Having an arbitration agreement stay proceedings provision in your contract can be a useful tool for resolving disputes outside of court. It provides privacy, cost savings, and more control over the process and outcome. If you`re considering including this provision in your contract, make sure to consult with an experienced attorney to ensure that it is drafted correctly and meets your business`s needs.