These days everything from cellular phone contracts to commercial leases mentions arbitration clauses. If you are conducting business in Florida, it’s likely that you will run into this language in a contract. Therefore, it’s important to understand this term, how it operates, and its impact on your agreement and business interests. So, how does a Florida arbitration clause work?
What is an Arbitration Clause?
The term “arbitration clause” refers to a contract or agreement provision requiring that the parties resolve their disputes using arbitration. Arbitration is a form of alternative dispute resolution that allows the parties to present evidence regarding a conflict and obtain a judgment outside of court.
Arbitration Clause Terms
Arbitration clause language will vary by the parties, their agreement, and their circumstances. However, contracting parties usually include arbitration-related terms such as:
- The arbitration’s location,
- If the decision will be binding or non-binding,
- Whether any specific organizational rules will bind the parties,
- The number of arbitrators who will oversee the dispute,
- How the parties will divide the expense of having the proceeding, and
- Whether attorney’s fees will be awarded.
The parties may also include certain exceptions regarding the types of disputes that can be brought to arbitration.
Is Arbitration Like Mediation?
Business arbitration is not the same process as mediation. Mediation involves the parties meeting with a neutral third party (the mediator) who will attempt to facilitate an agreement. Unlike arbitration, mediation is focused on helping the parties reach a settlement. Mediators don’t make rulings or decisions. By contrast, arbitration is more like a court proceeding, wherein both sides will present evidence to a decision-maker (the arbitrator) who will issue a decision regarding the matter.
Can Arbitration be Mandatory?
When parties agree to arbitration, the results can be binding or non-binding. In Florida, parties can be ordered to attend non-binding arbitration. However, most parties who participate in binding arbitration do so because they are subject to an arbitration clause that stipulates that they will be bound by the arbitrator’s decision.
Why Use an Arbitration Clause?
Business contract parties often include an arbitration clause to avoid prolonged litigation. Generally, arbitration is a much more efficient process than a traditional lawsuit. The parties can usually schedule an arbitration much sooner than a trial, and they don’t have to wait as long to receive a judgment. Arbitration clauses can also provide the parties with finality.
The arbitration process is also privately conducted. Business owners often prefer the confidentiality of arbitration to using an open forum such as a courtroom. With an arbitration clause, they can be assured of the privacy of the process and that there will not be a public record of their conflict.
Parties to a contract are often engaged in a specific type of business. Arbitration clauses allow them to choose an arbitrator with specialized knowledge regarding their industry. For instance, suppose you had a dispute regarding the performance of a real estate contract term. An arbitration clause would allow you to select an arbitrator with expertise or knowledge in this field.
Appealing an Arbitration Decision
One of the primary benefits of having an arbitration clause is that it allows for finality. When you agree with the way the process was conducted and the decision, this may not present a problem. However, if you disagree with the arbitrator’s decision, it can be challenging to appeal.
Under Florida law, “an appeal of a voluntary binding arbitration decision shall be taken to the circuit court and shall be limited to review on the record and not de novo, of:
- Any alleged failure of the arbitrators to comply with the applicable rules of procedure or evidence.
- Any alleged partiality or misconduct by an arbitrator prejudicing the rights of any party.
- Whether the decision reaches a result contrary to the Constitution of the United States or the State of Florida.”
In other words, an arbitration decision can only be appealed on the basis that the arbitrator violated the rules of procedure or evidence or was biased or because the decision violated the state or federal constitution.
If you’re considering adding an arbitration clause to an agreement or have a question or concern about an existing provision, you should contact an experienced small business attorney. You and your business lawyer can assess your issue and determine the options for your enterprise.
Contact an Experienced Florida Business Attorney
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent small business clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.