Oral Arbitration Agreement Template for the United States

An oral arbitration agreement creates a written record of your verbal commitment to resolve disputes through arbitration instead of traditional court litigation. While you may have reached an oral understanding with another party to arbitrate future disputes, documenting this agreement in writing provides crucial legal protection and ensures enforceability under United States federal and state laws.

When do you need this document?

You need an oral arbitration agreement when you've verbally committed to arbitrate disputes but want to formalize that understanding in writing. This commonly occurs in business negotiations where parties agree to arbitration during contract discussions but fail to include arbitration clauses in the final written contract. Employment situations also frequently require this document when employers and employees verbally agree to arbitrate workplace disputes outside of formal employment agreements. Additionally, you may need this agreement to resolve ongoing disputes where parties prefer arbitration over costly and time-consuming litigation, or when modifying existing contracts to include arbitration provisions that were previously only discussed verbally.

Key legal considerations

Your oral arbitration agreement must meet specific legal requirements to be enforceable under United States law. The agreement must clearly identify all parties and specify the types of disputes subject to arbitration, as overly broad or vague language can render the agreement unenforceable. You should carefully define the arbitration rules and procedures, including how arbitrators will be selected and what governing law will apply to both the arbitration process and underlying disputes. Consider whether you want to include class action waivers, as these provisions have been upheld by the Supreme Court in cases like AT&T Mobility v. Concepcion. Be aware that certain disputes cannot be arbitrated, including some employment law claims and consumer protection matters, depending on your jurisdiction and applicable federal laws.

Legal requirements in United States

The Federal Arbitration Act serves as the primary governing law for arbitration agreements in the United States, establishing that arbitration agreements are valid, irrevocable, and enforceable except upon grounds that exist for revoking contracts generally. Your agreement must demonstrate the basic elements of contract formation: offer, acceptance, and consideration. State arbitration laws may impose additional requirements, particularly regarding oral agreements, so you should verify compliance with both federal and applicable state statutes. The agreement should include clear language indicating mutual assent to arbitrate specific disputes and avoid unconscionable terms that courts might refuse to enforce. Documentation of the oral agreement should include witness statements or other evidence supporting the existence of the original verbal commitment, as this strengthens enforceability if the agreement's validity is later challenged in court.