Arbitration
A method of resolving disputes outside of court where a neutral third party (the arbitrator) hears both sides and makes a binding decision.
Arbitration is a process where a private, neutral person called an arbitrator listens to both sides of a dispute, reviews the evidence, and makes a decision. It is similar to a trial but less formal, usually faster, and often less expensive. Arbitration can be either binding (the decision is final and enforceable like a court judgment) or nonbinding (the parties can reject the decision and go to court).
Many contracts, including employment agreements, consumer contracts, and business agreements, include arbitration clauses that require disputes to be resolved through arbitration rather than in court. In Minnesota, the Uniform Arbitration Act governs how arbitration works. Minnesota courts also offer arbitration as one of several alternative dispute resolution (ADR) options to help parties settle cases without a trial.
Why it matters: If your contract has an arbitration clause, you may be required to use arbitration instead of going to court. Understanding whether arbitration is binding or nonbinding, and what rights you may be giving up, is important before signing any contract with an arbitration clause.
Example: Two businesses have a dispute over a construction contract. Their agreement requires binding arbitration. They present their cases to an arbitrator, who reviews the contract and evidence, then issues a decision ordering one business to pay the other $50,000. The decision is final and can be enforced like a court judgment.
Contract disputes, employment agreements, consumer disputes, clauses in contracts