Non Binding Arbitration Clause for the United States

Non Binding Arbitration Clause Template for United States

A Non-Binding Arbitration Clause is a legal provision used in United States contracts that establishes a framework for resolving disputes through arbitration while preserving parties' rights to pursue formal legal action. This clause provides a structured yet flexible approach to conflict resolution, allowing parties to attempt resolution through arbitration without being bound by the arbitrator's decision. It operates under both federal and state arbitration laws, offering a less formal alternative to litigation while maintaining access to courts if needed.

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What is a Non Binding Arbitration Clause?

The Non-Binding Arbitration Clause is designed for situations where parties wish to attempt alternative dispute resolution while maintaining their right to pursue litigation. This document type is particularly relevant in the United States, where it operates under the Federal Arbitration Act and state-specific arbitration laws. It details the arbitration process, arbitrator selection, cost allocation, and explicitly states the non-binding nature of the arbitrator's decision. This clause is frequently used in commercial contracts where parties want to demonstrate good faith in dispute resolution while retaining their legal options.

What sections should be included in a Non Binding Arbitration Clause?

1. Parties: Identification and details of all parties involved in the arbitration agreement

2. Background: Context and circumstances leading to the arbitration agreement

3. Definitions: Key terms used throughout the document

4. Scope of Non-Binding Arbitration: Clear definition of what disputes are subject to the non-binding arbitration process

5. Arbitration Process: Detailed procedure for initiating and conducting the arbitration

6. Rights Preservation: Statement preserving parties' rights to pursue other legal remedies

What sections are optional to include in a Non Binding Arbitration Clause?

1. Confidentiality Provisions: Rules regarding confidentiality of the arbitration process - include when parties wish to keep the proceedings private

2. Cost Allocation: How arbitration costs will be shared between parties - include when parties want to specify cost distribution

3. Time Limits: Specific timeframes for various stages of the process - include when timing is critical to the resolution

What schedules should be included in a Non Binding Arbitration Clause?

1. Schedule 1 - Arbitrator Selection Process: Detailed procedure for selecting arbitrators including qualification requirements and selection methodology

2. Schedule 2 - Fee Schedule: Breakdown of potential costs and fees associated with the arbitration process

3. Schedule 3 - Procedural Rules: Detailed rules governing the conduct of the arbitration including timelines, submission requirements, and hearing procedures

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Federal Arbitration Act (FAA): Primary federal law governing arbitration in the US. While focused on binding arbitration, it provides the fundamental framework and must be considered when drafting non-binding arbitration clauses to ensure clear distinction

State Arbitration Laws: Individual state-specific arbitration regulations that must be complied with, including consideration of federal preemption issues and state-specific requirements for alternative dispute resolution

Alternative Dispute Resolution Acts: Various state and federal ADR laws, including the Administrative Dispute Resolution Act for federal agencies, which provide additional regulatory framework for non-binding arbitration

Relevant Case Law: Supreme Court decisions, circuit court rulings, and state court precedents on arbitration enforceability and ADR processes that impact the drafting of non-binding arbitration clauses

Clear Language Requirement: Legal requirement to use explicit language that distinguishes non-binding from binding arbitration to prevent confusion and potential legal challenges

Voluntary Process Provisions: Legal requirement to establish the voluntary nature of the arbitration process in the clause to ensure enforceability and compliance with ADR principles

Rights Preservation Language: Legal requirement to include language that explicitly preserves parties' legal rights and ensures they understand these rights are not waived through the non-binding arbitration process

Court Access Preservation: Legal requirement to maintain and explicitly state the parties' right to access courts and pursue litigation if the non-binding arbitration is unsuccessful

Procedural Framework: Legal requirement to establish clear procedures for the arbitration process, including timelines, notice requirements, and process steps

Confidentiality Provisions: Legal considerations regarding the confidentiality of the arbitration process and any resulting decisions or settlements

Cost Allocation: Legal requirements regarding the fair allocation and disclosure of arbitration costs between parties

Arbitrator Selection Process: Legal requirements for establishing a fair and transparent process for selecting arbitrators, including qualification requirements and disclosure obligations

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U.S.-governed employment agreement establishing mandatory arbitration as the primary dispute resolution method, compliant with federal and state requirements.

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What is a Non Binding Arbitration Clause?

What sections should be included in a Non Binding Arbitration Clause?

What sections are optional to include in a Non Binding Arbitration Clause?

What schedules should be included in a Non Binding Arbitration Clause?

Authors

Alex Denne

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