Arbitration and Dispute Resolution Clause
What it is
An arbitration clause replaces litigation with a private dispute resolution process. Instead of a public trial, disputes go to an arbitrator — a private decision-maker — whose ruling is usually binding and not appealable. Many arbitration clauses also include a class action waiver, preventing you from joining with others who have the same complaint.
Why it matters to you
Arbitration is not inherently unfair, but the details matter. Mandatory arbitration in the other party's home city, before an arbitrator from a provider pool they have relationships with, at costs you split equally regardless of outcome — that is a very different situation than a neutral arbitration in a central location with costs awarded to the prevailing party. The class action waiver matters separately: it prevents collective action and may make small individual claims economically impossible to pursue.
The aggressive version
This is mandatory arbitration language drafted to favor the party who includes it.
Any dispute, controversy, or claim arising out of or relating to this Agreement shall be resolved exclusively by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules in [Client's City, Client's State]. The arbitration shall be conducted before a single arbitrator. The costs of arbitration shall be split equally between the parties regardless of outcome. THE PARTIES WAIVE ALL RIGHTS TO TRIAL BY JURY AND TO PARTICIPATE IN ANY CLASS ACTION OR COLLECTIVE PROCEEDING.
What each part does to you
“in [Client's City, Client's State]”
You must travel to their location for arbitration, at your own expense. This creates a practical barrier to bringing any claim.
“costs of arbitration shall be split equally”
Filing fees and arbitrator costs can run $5,000–$15,000 or more. Split equally, this may make small claims economically impossible for you.
“regardless of outcome”
Even if you win, you pay half the arbitration costs. There is no cost shifting to the losing party.
“WAIVE ALL RIGHTS TO TRIAL BY JURY”
Caps-locked to signal you should notice this. You give up access to the public court system.
“CLASS ACTION OR COLLECTIVE PROCEEDING”
If many people have the same claim against this company, you cannot join together. Each person arbitrates individually, which often makes it not worth pursuing.
The market standard version
A fair dispute resolution clause allows both parties to protect themselves without stacking the deck in either direction.
Any dispute shall first be submitted to good-faith negotiation between designated representatives of both parties for thirty (30) days. If unresolved, either party may pursue binding arbitration through a neutral arbitration provider, with the venue to be agreed by both parties or, if no agreement is reached, in the city where the responding party is located. Arbitration costs shall be allocated by the arbitrator based on the merits. Both parties retain the right to seek injunctive relief in any court of competent jurisdiction for claims involving intellectual property or confidentiality.
Your counter-language
This version preserves your ability to pursue disputes without the structural disadvantages of forced arbitration in the other side's backyard.
Disputes shall first be addressed through good-faith negotiation for thirty (30) days. If unresolved, either party may pursue claims in any court of competent jurisdiction, or both parties may agree to binding arbitration with a mutually selected arbitrator and a venue halfway between both parties' principal offices. Arbitration costs shall be awarded to the prevailing party. Nothing herein prevents either party from seeking emergency injunctive relief. The parties do not waive the right to class or collective proceedings.
What to ask for
“Can we add a 30-day negotiation requirement before arbitration, so both sides have a chance to resolve this without spending money on process?”
“If we keep arbitration, can the venue be neutral rather than your home city, and can cost allocation go to the prevailing party?”
“Can we preserve each party's right to seek injunctive relief in court for IP and confidentiality claims?”
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ClauseCheck is not a law firm and does not provide legal advice. The clause examples and counter-language on this page are illustrative only and are not a substitute for advice from a qualified attorney. Contract terms vary by context; consult a lawyer before making decisions on any specific agreement.
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