Oral Agreement for Arbitration

As more and more businesses look for ways to avoid costly and time-consuming litigation, alternative dispute resolution methods such as arbitration are becoming increasingly popular. One way in which companies can opt for arbitration is by including an oral agreement for arbitration in their contracts.

An oral agreement for arbitration is essentially an agreement made between two parties to resolve any disputes arising from their contract through arbitration, rather than through litigation in a court of law. This agreement is made verbally and can be enforced by law, even though it is not necessarily in writing.

While an oral agreement for arbitration is legally binding, it is important to ensure that both parties are aware of the terms of the agreement and have agreed to them. This can be achieved by recording the conversation in which the agreement is made or by following up with an email or letter confirming the terms of the agreement.

It is also important to note that an oral agreement for arbitration is subject to the same rules and regulations as a written agreement. This means that both parties must agree to arbitration as the method of dispute resolution, and the terms of the arbitration must be clearly defined.

If a dispute arises and one party does not wish to abide by the oral agreement for arbitration, the other party may need to seek legal action to enforce the agreement. This can be a complicated process and may result in delays and additional costs.

To avoid any potential issues, it is recommended that businesses include a written arbitration clause in their contracts. This clause should clearly define the terms of arbitration, including the rules and procedures to be followed, as well as the selected arbitrator or arbitration organization.

In conclusion, an oral agreement for arbitration can be an effective way for businesses to reduce the cost and time associated with litigation. However, to ensure that the agreement is legally binding and enforceable, it is important to clearly define the terms of arbitration and confirm the agreement in writing.