Arbitration clause in business contracts
An arbitration clause defines how disputes will be resolved if disagreements arise between contract parties.
Instead of going through court litigation, both sides agree in advance to handle conflicts through arbitration — often faster, more private, and more efficient.
Why businesses use arbitration clauses
Arbitration offers several important advantages for companies:
- Confidentiality — hearings are not public, protecting sensitive business information.
- Flexibility — parties can choose the arbitration location, language, applicable law, and arbitrators.
- Speed — arbitration is often faster than court litigation.
- Cross-border convenience — especially helpful for international contracts where jurisdictions differ.
This level of control makes arbitration a common choice in complex business contracts.
What an arbitration clause includes
A standard arbitration clause usually specifies:
- Which disputes will be handled through arbitration.
- The arbitration organization (such as ICC or LCIA).
- Location, language, and governing law.
- Number of arbitrators involved.
- Enforcement rules for the final decision.
Having these terms defined in advance helps avoid uncertainty when conflicts occur.
Benefits of arbitration clauses
In addition to flexibility, arbitration allows businesses to manage disputes predictably.
The process typically involves fewer formalities than litigation, and the parties know the exact procedure before any disagreement happens. This helps both sides maintain control over how conflicts are resolved.
Risks and limitations
While arbitration offers many benefits, it isn’t perfect:
- Costs can sometimes exceed those of local courts.
- Opportunities for appeal are extremely limited.
- Poorly drafted clauses may lead to procedural disputes.
That’s why careful contract drafting remains essential.
Where arbitration clauses appear
Arbitration clauses are common in:
- master services agreements
- service agreements
- long-term business contracts
- licensing agreements
- supply contracts
- partnership agreements
Signing contracts with arbitration clauses electronically
Today, most business contracts include arbitration clauses directly in the main agreement. Electronic signing makes the process faster and more secure:
- eSignatures are legally valid in most jurisdictions.
- Full signing history and audit trails are stored automatically.
- Platforms like DocuChain allow businesses to securely eSign contracts and track every step of the process.
Need to eSign a contract with an arbitration clause?
DocuChain makes it easy to sign business contracts online — secure, fast, and fully transparent. Sign for free
Create Digital Signature
Tap in area to upload your document
Drop your file or click to upload your document.
