Arbitration And Mediation Clause Template for the United States

An Arbitration And Mediation Clause is a contractual provision that requires you to resolve disputes through alternative dispute resolution methods rather than pursuing traditional court litigation. Under United States law, these clauses have gained significant enforceability following landmark Supreme Court decisions and are governed primarily by the Federal Arbitration Act, making them a powerful tool for streamlining dispute resolution in various types of agreements.

When do you need this document?

You need an Arbitration And Mediation Clause when drafting commercial contracts, employment agreements, service contracts, or consumer agreements where you want to avoid costly and time-consuming litigation. This clause is particularly valuable in business-to-business relationships, employer-employee agreements, contractor arrangements, and subscription services where disputes may arise over contract terms, performance, payment, or termination. The clause becomes essential when you operate across state lines, as federal arbitration law provides uniform enforcement. You should also include this provision when dealing with industries prone to disputes, such as construction, technology services, or franchise agreements, where specialized arbitrators may better understand complex technical or industry-specific issues than general court judges.

Key legal considerations

When drafting your arbitration and mediation clause, you must carefully define the scope of disputes covered to avoid future disagreements about arbitrability. Consider whether you want to include all disputes or exclude certain matters like intellectual property claims or injunctive relief requests. The clause should specify whether mediation is mandatory before arbitration and establish reasonable timeframes for each process. You need to address arbitrator selection procedures, including the number of arbitrators and the selection mechanism, as this directly impacts costs and potential bias. Consider specifying applicable arbitration rules, such as those from the American Arbitration Association or JAMS, and determine how costs will be allocated between parties. Be mindful of unconscionability concerns, particularly in consumer contracts, where courts may invalidate overly one-sided provisions that prevent meaningful access to dispute resolution.

Legal requirements in United States

Under United States federal law, your arbitration clause must comply with the Federal Arbitration Act, which establishes a strong federal policy favoring arbitration and preempts conflicting state laws. The clause must be part of a valid contract and cannot be unconscionable under general contract principles. For employment agreements, you should be aware that the clause cannot waive employees' rights to file charges with federal agencies like the EEOC, though it can require arbitration of individual employment disputes following the Epic Systems decision. In consumer contracts, some states impose additional requirements for arbitration clauses to be enforceable, such as prominent disclosure requirements or limitations on cost-shifting provisions. The clause must provide for a neutral arbitration process and cannot prevent parties from accessing meaningful dispute resolution. Additionally, certain types of disputes, such as those involving federal civil rights claims, may have specific requirements or limitations on arbitration that you must consider when drafting your clause.