Definition
A process where a neutral arbitrator hears both sides and issues a binding decision outside court, typically faster and more private than litigation. Many purchase contracts require arbitration before court.
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Arbitration is more formal than mediation but less formal than court. The arbitrator hears evidence from both sides and issues a binding award that the parties have agreed in advance to accept. Arbitration is often faster than litigation because there are fewer procedural rules. However, arbitration offers limited appeal rights, and arbitrators' decisions are generally final.
Pro Tip
Understand whether your contract requires arbitration. These agreements limit your legal options.
Example
A contract includes an arbitration clause; when a dispute arises over repair obligations, the parties submit to arbitration, where an arbitrator hears arguments and issues a binding decision awarding the buyer $25,000 in repair credit.