The Role of Arbitration Clauses in California Contracts
- Posted on: Apr 14 2025
Contracts frequently include terms that require the parties to undergo arbitration either in lieu of or prior to filing a lawsuit. Arbitration is an alternative dispute resolution (ADR) method which is in many ways like a private trial, although less formal. If you as an individual or business have entered into a contract which contains an arbitration clause, it’s important to understand its implications in the event you later have a dispute involving the contract.
Santa Barbara and Ventura, CA clients depend on the Law Offices of Brian L. Fox, APLC to help them understand the various rules and implications of arbitration. We can analyze your obligations under the arbitration clause and represent you during this important out-of-court proceeding.
What is Arbitration?
Arbitration is a process in which a neutral third party known as an arbitrator weighs evidence and arguments put forth by opposing parties and then renders a decision in the matter. If this sounds like a trial, that’s because it is in many ways like one. The rules of evidence and civil procedure are typically relaxed and the overall process is more informal, but the arbitrator’s decision is nonetheless significant.
Many contracts, especially employment contracts, include arbitration clauses because they are less expensive, time-consuming, and burdensome on all parties versus traditional litigation. An arbitrator’s decision may be non-binding (advisory) or binding, depending on the language of the contract. Although a non-binding decision can be appealed, binding decisions are usually not appealable unless there are extenuating circumstances (e.g. evidence of undue influence over an arbitrator).
What it Means to Sign a Contract That Requires Arbitration
Arbitration clauses will significantly affect your legal options in the event a dispute arises concerning the terms of the contract. By signing the contract, you are agreeing to submit any dispute to arbitration either prior to or instead of taking your matter to court. Many employees do not fully understand what arbitration is and how it could impact their rights, so be sure to speak with our civil litigation attorney before signing a contract that includes arbitration terms.
If you have not yet signed a contract requiring arbitration, you may be able to negotiate its terms. This may include opting out of it. Your options for skipping arbitration are more limited if you have already signed the contract, but that doesn’t mean that doing so is impossible.
How California Law Treats Arbitration Clauses
If you are party to a contract in Santa Barbara or Ventura, CA, you should peruse the agreement to determine if there are any arbitration clauses. These terms are generally enforceable in California except in such cases as:
- The party who signed the contract was under duress at the time
- The arbitration terms are so one-sided that the court determines them to be unconscionable
- The terms prevent a party from pursuing their claims in a fair manner or the arbitration process itself is unreasonable
- The terms require the party to waive a trial by jury or other fundamental legal protections
- For employment contracts, if the employer requires the employee to waive their rights under California labor laws
What to Expect During Arbitration
The arbitrator will usually be someone with considerable legal experience such as a retired judge or lawyer. They will hear both sides of the dispute, weigh the evidence and arguments, and render a binding or non-binding decision. You can and should have an attorney represent you during this process, especially if:
- The arbitrator’s decision will affect your legal rights
- Substantial monetary damages are at stake
- You do not know how to make compelling legal arguments
- You are unfamiliar with the laws that are at issue in the arbitration
- Your opponent is an employer, a large corporation, or another party with ample resources
Our Dedicated Attorney is Ready to Handle Your Arbitration
Whether you have questions about an arbitration clause in a contract you have been asked to sign, or you need legal counsel and representation during the arbitration itself, let the Law Offices of Brian L. Fox, APLC guide you. Call or reach us online to learn more.
Posted in: Contracts
