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Why You May Want to Include a Mandatory Arbitration Clause in a Business Contract in Florida

Business disputes happen. They are always a risk. When you enter any type of business relationship, you need to be prepared to handle a dispute. The reality is that commercial disputes can arise for a wide range of different reasons. Many companies opt to include pre-dispute mandatory arbitration clauses in their contracts. Within this article, our Clearwater contract lawyer explains why you may want to include a mandatory dispute provision in a business agreement in Florida.

Background: Well-Drafted Mandatory Arbitration Provision is Enforceable in Florida 

As explained by The Florida Bar, “arbitration is a method of resolving disputes outside of court.” In Florida, a properly drafted mandatory arbitration provision is legally enforceable. As long as it meets specific criteria—including being reasonably fair and clear—a court will generally uphold such a clause. In effect, this means parties to a contract that is subject to a pre-dispute arbitration agreement can be required to arbitrate their dispute.

Key Point: A mandatory arbitration clause can be invoked if a dispute arises over a business contract. When invoked, the provision can compel parties to arbitrate instead of litigate.

Three Potential Advantages of a Mandatory Arbitration Clause in a Business Contract

What is the benefit of a mandatory arbitration clause? There are actually a number of different potential advantages for businesses in Florida, including:

  • Save Time: One of the most compelling reasons to include an arbitration clause in a contract is the potential for faster dispute resolution. Litigation can be notoriously slow. There are a lot of issues to deal with, including comprehensive procedural requirements and crowded court dockets. In contrast, arbitration moves far more quickly. The arbitration process—including for a complex commercial dispute—is a lot faster than litigation.
  • Save Money: Arbitration can also save money over litigation. The quick resolution of disputes saves on prolonged legal fees. Beyond that, the process is generally less formal, potentially reducing the need for extensive legal preparations—including things like such as discovery—that require significant amounts of attorney time and resources. The reduced need for a full-blown trial often makes arbitration a financially prudent choice for smaller businesses. Notably, appellate options are reduced with arbitration.
  • Provide Certainty: Finally, arbitration clauses also provide some degree of certainty should a dispute arise. When parties know from the start that any disputes will be settled through arbitration, they can plan their legal strategies and potential outcomes more effectively. A properly drafted business agreement can make it clear how any dispute over its terms will be addressed and resolved.

Set Up a Fully Private Case Assessment With a Top-Tier Florida Business Attorney

At Clearwater Business Law, our firm is devoted to solutions-focused guidance and support to small and mid-sized companies. Give us a phone call at (727) 785-5100 or connect with us online for a fully confidential case evaluation. With a law office in Clearwater, we provide business law representation throughout the wider area, including in Largo, St. Petersburg, and Pinellas Park.