Eric N. Macey recently was interviewed on the potential pitfalls of using arbitration to resolve business disputes. The resulting article appears in this month’s Smart Business Chicago magazine [link] and in the publication’s online edition.
The article addresses the fact that more and more businesses are including arbitration provisions in their contracts in an attempt to save time and expense should a dispute arise. “While arbitration is generally quicker and more cost effective,” Mr. Macey said, “that is not always the case and arbitration results are not necessarily generally better.”
Mr. Macey offers a “rule of thumb” for deciding whether an arbitration clause is a good idea: “the more sophisticated the contractual relationship, the less likely I would want to include an arbitration provision.”
For example, Mr. Macey said, “[i]f I am entering a one-off contract to buy a product that is not cost-prohibitive, I would include an arbitration clause, but if it is a contract to purchase variable amounts of a product over time that is integral to my business with fluctuating pricing and quality standards, I would opt to keep out the clause.”
If a business decides that an arbitration clause is appropriate, then the clause must have certain provisions. “[D]on’t just add a standard arbitration provision and think that everything will take care of itself, because it won’t,” Mr. Macey cautioned.
“You need to consider whether the provision covers such things as the selection of arbitrators, the location of the arbitration, whether any pretrial procedures should be included, whether the provision should prevent the arbitrator from issuing awards for punitive damages or lost profits, whether the arbitrator has to provide reasons for his or her decision and how quickly the arbitrator must render his or her award.
Mr. Macey has extensive trial experience in state and federal courts throughout the country and has acted as both an arbitrator and mediator in various alternative dispute resolution settings. For more information contact Mr. Macey at firstname.lastname@example.org or (312) 419-6900.