Arbitration Clause and Submission Agreement: Understanding the Difference
In today`s business world, many contracts and agreements contain clauses and terms that dictate how disputes are handled between parties. Two commonly confused terms in this regard are the arbitration clause and the submission agreement. Both of these terms refer to mechanisms for resolving disputes outside of the traditional court system, but they are not interchangeable. Here`s what you need to know to understand the difference between an arbitration clause and a submission agreement.
What Is an Arbitration Clause?
An arbitration clause is a provision in a contract that requires disputes between the parties to be resolved through arbitration. Arbitration is a private, judicial process in which an impartial third party, known as an arbitrator, hears and decides on a dispute. The arbitrator`s decision is binding and typically cannot be appealed.
The purpose of an arbitration clause is to provide a more efficient and cost-effective alternative to traditional litigation. Instead of going through the court system, parties can resolve their disputes in a more streamlined, informal manner through arbitration.
What Is a Submission Agreement?
A submission agreement, on the other hand, is a standalone agreement that establishes the terms and conditions of an arbitration proceeding. It usually includes specific details about the process, such as the number of arbitrators, procedures for selecting the arbitrators, and the location of the arbitration. A submission agreement may be included as part of a larger contract, but it is a separate agreement in and of itself.
A submission agreement is typically used when parties have already decided to use arbitration to resolve a dispute, but need to establish the details of the process. It is often entered into after a dispute has arisen but before the arbitration begins.
Key Differences Between an Arbitration Clause and a Submission Agreement
The main difference between an arbitration clause and a submission agreement is that the former is a provision within a larger contract, while the latter is a standalone agreement. Another key difference is that an arbitration clause is focused on the requirement of arbitration, while a submission agreement is focused on the details of the arbitration process.
Arbitration clauses are often broad and general, while submission agreements are more specific and detailed. Arbitration clauses may simply state that any disputes will be resolved through arbitration, while a submission agreement will include details about the location, timing, and rules of the arbitration.
Conclusion
In summary, an arbitration clause is a provision within a contract that requires disputes to be resolved through arbitration, while a submission agreement establishes the details of the arbitration process. While the two terms are often used interchangeably, it`s important to understand the differences between them to ensure that contracts and agreements are properly written and executed. If you have any questions about the use of arbitration clauses or submission agreements, it`s always best to consult with a qualified attorney.