The Mandatory Arbitration Provision serves as a critical risk management tool in U.S. business relationships, requiring parties to resolve disputes through private arbitration rather than public court proceedings. This document type has become increasingly common in various contracts, from employment agreements to consumer contracts, supported by strong federal policy favoring arbitration under the Federal Arbitration Act. The provision typically details the scope of arbitrable disputes, arbitrator selection process, cost allocation, and procedural framework, while ensuring compliance with both federal and state arbitration laws.
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1. Parties: Identifies the parties entering into the arbitration agreement
2. Background: Context and purpose of the arbitration provision
3. Definitions: Key terms used throughout the arbitration provision
4. Agreement to Arbitrate: Clear statement of mutual agreement to resolve disputes through arbitration
5. Scope of Arbitration: Defines what disputes are covered by the arbitration provision
6. Arbitration Procedures: Specifies the rules and procedures governing the arbitration process
7. Selection of Arbitrator: Process for choosing the arbitrator(s)
8. Cost Allocation: How arbitration costs will be shared between parties
1. Class Action Waiver: Waiver of right to participate in class actions, used when permitted by law
2. Opt-Out Provision: Allows parties to opt out of arbitration within specified timeframe, common in consumer contracts
3. Severability Clause: Ensures remainder of provision survives if part is found unenforceable
4. Choice of Venue: Specifies location for arbitration proceedings, optional but recommended
1. Arbitration Rules: Detailed procedures from chosen arbitration organization (e.g., AAA, JAMS)
2. Fee Schedule: Breakdown of arbitration costs and fee allocation
3. Excluded Claims: List of specific disputes excluded from arbitration requirement
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