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Two Types of Arbitration Agreement

When it comes to legal disputes, one common method of resolving them is through arbitration. This is a process where a third party, known as the arbitrator, listens to both sides and makes a final decision. Many businesses and individuals use arbitration agreements to avoid going to court and save time and money. However, not all arbitration agreements are the same. In this article, we will explore two types of arbitration agreements: binding and non-binding.

Binding Arbitration Agreements

A binding arbitration agreement is one in which both parties agree to accept the decision made by the arbitrator as final and binding. This means that neither party can appeal the decision in court, and they must accept the outcome. Binding arbitration agreements are often used in commercial contracts, employment agreements, and consumer contracts.

One of the benefits of binding arbitration agreements is that they can save time and money. Going to court can be a lengthy and expensive process, and arbitration can provide a faster and less costly alternative. Additionally, the decision made by the arbitrator is final, which can provide closure for both parties.

However, there are some potential drawbacks to binding arbitration agreements. Because the decision is final, there is no opportunity to appeal if the arbitrator makes an error. Additionally, the arbitrator`s decision may not be based on legal precedent, which can make it difficult to predict and enforce.

Non-Binding Arbitration Agreements

A non-binding arbitration agreement is one in which both parties agree to submit the dispute to an arbitrator, but neither party is required to accept the decision. This means that either party can reject the decision and take the dispute to court if they are not satisfied with the outcome.

Non-binding arbitration agreements can provide a way for both parties to test the strength of their case before going to court. It can also provide an opportunity for the parties to negotiate a settlement before going to court. Additionally, because the decision is not final, there is an opportunity to appeal if the parties are not satisfied with the arbitrator`s decision.

However, there are also potential drawbacks to non-binding arbitration agreements. They can be more time-consuming than binding agreements, as both parties may continue to negotiate and argue their case after the arbitrator`s decision. Additionally, because the decision is non-binding, there is no guarantee that the parties will ultimately come to a settlement.


Arbitration agreements can be a valuable tool for resolving legal disputes. However, choosing between a binding or non-binding agreement requires careful consideration of the benefits and drawbacks. Binding agreements can provide a fast and final resolution to disputes, while non-binding agreements can provide an opportunity for negotiation and a chance to appeal. Legal professionals can help their clients determine which type of arbitration agreement is best suited to their needs.

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