What does an arbitration agreement cost? If you have a legal contract and want to include an alternate dispute resolution, you may ask about the cost of an arbitration agreement. Let’s explore this question and review some general information about arbitration agreements.
According to Based on ContractsCounsel’s marketplace data, the average cost of an arbitration agreement is $624.50 across all states and industries.
How Much Does an Arbitration Agreement Cost?
An arbitration agreement is a legally binding contract clause that provides parties to the contract with an alternative to civil court litigation if a dispute arises.
Instead of the parties spending money on lawyers and court fees, they will enter into the arbitration process if there is an issue concerning the contract.
Arbitration is a faster and more affordable way to resolve a conflict than filing a lawsuit in civil court. In addition, arbitration is less formal than legal proceedings. In most cases, both parties have the right to be represented by a lawyer.
Arbitration requires limited discovery, but there is still a hearing and the opportunity to question witnesses. Then, a pre-determined arbitrator decides the case's outcome instead of a judge.
Arbitration agreements have many positives and disadvantages for the parties entering the agreement. To fully understand the scope of an arbitration agreement and ensure it is legally binding, it is recommended that an experienced attorney drafts this contract.
A contract attorney familiar with arbitration agreements will know what this clause must include to protect all parties and ensure a smooth arbitration process if it is ever needed.
What is Included in an Arbitration Agreement?
Arbitration clauses are generally a standard clause within a larger contract that informs the parties they are agreeing to arbitration as an alternative dispute resolution method.
An arbitration clause typically says that all disputes arising under the larger contract will be submitted to binding arbitration. However, sometimes a contract will say that only certain disputes will be arbitrated.
Other information that may be found in an arbitration agreement includes:
- The kinds of disputes are subject to arbitration
- Arbitration rules like the American Arbitration Association (AAA) rules or the United States Arbitration & Mediation Rules of Arbitration
- Whether there will be one arbitrator or a panel of arbitrators
- How the arbitrator(s) is chosen
The clause should also state that the parties signing acknowledge that the arbitrator’s decision is final and binding.
Advantages and Disadvantages of Signing an Arbitration Agreement
There are several advantages to including an arbitration agreement in a contract, including:
- Arbitration is faster and less expensive than civil litigation
- Arbitrations are confidential, and there won’t be any public court records
- Parties to arbitration can agree on their arbitrator who decides the case
- More informal process than civil litigation
- Rules of evidence don’t apply to arbitration
Arbitration agreements also have disadvantages that each party should be aware of before agreeing to an arbitration agreement.
- Arbitration cannot be appealed, and the arbitrator’s decision is final
- No jury trials
- Limited discovery and exchange of information
- Some arbitration agreements can be one-sided and favor the drafting party
Arbitration is usually faster and less expensive than civil litigation. Still, it is important to understand the rights you are waiving when you sign an arbitration agreement.
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Arbitration Agreement Drafting
An arbitration agreement must include important key terms to make it legally binding. It should define:
- Which disputes will be arbitrated
- Terms of arbitration
- How the arbitration will be conducted
An attorney who is experienced with arbitration agreements will be able to draft a comprehensive arbitration clause to add to your contract.
Before beginning a drafting project, a lawyer will meet with their client to learn about the contract that requires an arbitration agreement. After gathering all important information and learning about the client’s arbitration goals, the lawyer can draft an arbitration agreement that protects the client’s interests.
Arbitration Agreement Review
If you are faced with signing an arbitration agreement, it is vital that you understand what you are signing. While arbitration does have advantages, those agreeing to arbitrate disputes are giving up several important legal rights.
Before agreeing to arbitration, it is recommended that you hire an attorney to review the arbitration clause. This is because contracts are often drafted in favor of the drafting party, which means an arbitration agreement could be one-sided or biased.
Hire an experienced attorney to review the agreement. They will ensure that the contract is fair and make sure the contract gives you rights like playing a role in choosing the arbitrator and the right to hire an attorney for representation in arbitration.
Arbitration Agreement Drafting Cost
Anytime a lawyer is hired for a project that takes time and legal expertise to complete, they will charge their client for their services. Depending on the fee arrangement, lawyers will often charge clients for consultations, the actual time spent working on the case or project, and any revisions.
Some lawyers will even charge for communication like emails or phone calls, so be sure to understand your fee agreement fully.
ContractsCounsel’s marketplace data shows that the average arbitration agreement drafting costs are $750 across all states and industries.
Arbitration Agreement Review Cost
Reviewing documents also takes a lawyer’s time and expertise, so you will incur legal fees if you want your arbitration clause to be reviewed before you sign.
ContractsCounsel’s marketplace data shows the average cost to review an arbitration agreement is $500 across all states and industries.
How Do Lawyers Charge for an Arbitration Agreement?
Hourly Rates for an Arbitration Agreement
An hourly rate fee structure is one of the more popular arrangements when hiring an attorney. When using an hourly rate structure, the attorney will bill the client at a set hourly rate for the number of hours worked on the project.
Billable hours can include:
- Meeting with the client to discuss the content of the agreement
- Drafting the contract
- Revising the contract
ContractsCounsel’s marketplace data shows the average hourly rate for a contract lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for an Arbitration Agreement
A flat rate billing structure is becoming more common for contract drafting projects. When using a flat fee rate, a lawyer will provide the client with a quote for the entire job. If the client agrees, they will pay upfront, and the lawyer will begin working on their case or project.
Flat fee billing benefits clients because they know exactly how much legal services will cost before paying the bill. However, before starting the project, a client must understand what’s included with the fee. Additional services like consultations and revisions may lead to more legal fees.
ContractsCounsel’s marketplace data shows the average flat fee rate for an arbitration agreement is $624.50.
Get Help with an Arbitration Agreement
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