Contract Law Governing Arbitration Agreement

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Contract Law Governing Arbitration Agreement: What You Need to Know

Arbitration is a dispute resolution method that involves the use of an arbitrator to settle a dispute between two parties outside of court. While most people may not understand the intricacies of arbitration, parties to a contract may opt for this method to avoid court battles and achieve swift resolution of disputes.

Arbitration agreements are commonly included in contracts, and they are governed by contract law. This article will provide an overview of the contract law governing arbitration agreements.

What is an Arbitration Agreement?

An arbitration agreement is a contractual provision that requires disputes arising from the contract to be resolved through arbitration. The agreement specifies the number of arbitrators, the procedures for selecting them, and how the arbitration process will be conducted. In most cases, parties to a contract agree to arbitration because it is faster, more cost-effective, and less formal than going to court.

Contract Law and Arbitration Agreements

Arbitration agreements in contracts are binding, and courts generally enforce them. The contract law governing arbitration agreements emphasizes the importance of parties to a contract abiding by the agreed-upon arbitration process. Courts will dismiss lawsuits filed in breach of an arbitration agreement, and parties may lose their rights to arbitrate if they fail to follow the agreed-upon procedures.

The Federal Arbitration Act (FAA)

The Federal Arbitration Act (FAA) was enacted in 1925, and it governs arbitration agreements in contracts. The FAA applies to all contracts that involve interstate commerce, and it establishes a federal policy in favor of arbitration. The policy aims to ensure that arbitration agreements are enforced as per their terms, and that disputes should only be brought before a court if there is a clear breach of the arbitration agreement.

The FAA provides that courts should enforce the arbitration agreement as per its terms, and that the arbitrator’s decision should be final and binding. The FAA also provides mechanisms for challenging arbitration awards and for vacating them in certain circumstances.

State Laws

In addition to the FAA, state laws also govern arbitration agreements in contracts. State arbitration laws may apply to contracts that do not involve interstate commerce. State arbitration laws may also address issues such as the validity of arbitration agreements, the ability to waive arbitration, and the scope of the arbitration agreement.


Arbitration agreements in contracts are valuable tools that can help parties resolve disputes without going to court. These agreements are governed by contract law, the FAA, and state laws, and parties must abide by the agreed-upon arbitration process.

As a professional, I hope this article has provided you with a basic understanding of the contract law governing arbitration agreements. If you need assistance drafting an arbitration agreement or enforcing an existing agreement, consult a legal professional who can guide you through the process.