Contractual Arbitration Agreements in Texas - An Overview

If you sign an agreement in Texas that contains an arbitration clause, you will effectively be waiving the ability to go to court and to have a trial, either by jury or in front of a judge. For the most part, Texas courts will look to enforce arbitration agreements, and absent fraud, duress or some other disparity in bargaining power, such agreements will usually be enforceable. Whether an agreement to arbitrate is something you are comfortable signing is ultimately your decision, and you should consider the subject matter contemplated by the agreement.

Both arbitration and litigation certainly have their advantages and disadvantages. The primary advantage of arbitration is that it can be cheaper than traditional litigation, and arbitration usually proceeds to final hearing more quickly than traditional litigation proceeds to trial. However, one downside of arbitration is the "split the baby" tendency. In other words, a panel of arbitrators is more likely to decide a matter in the middle where the claimant doesn't recover all that it is asking for, and the respondent ends up having to pay something out of pocket. Therefore, if you have been sued unjustly, you have a better shot of zeroing the other party out in a court of law.

Moreover, arbitration differs from trial because only limited discovery is available. For example, in most arbitrations you will not be able to conduct depositions prior to having your final hearing. Furthermore, summary disposition procedures are not available in arbitration. For instance, in a traditional trial setting, you have the ability to seek dismissal of the matter prior to trial. In essence, you can seek what is called summary judgment, and the judge will have the option of ruling in your favor without the necessity of going to trial. You will be deprived of this procedure in arbitration.

Furthermore, by agreeing to arbitration, you are effectively agreeing to a "one shot deal" to resolve the matter. More particularly, arbitration awards are difficult to overturn by appeal. In fact, only limited means are available to appeal arbitration awards, and the award rendered by the arbitration panel will usually stand unless the award was procured by fraud by one of the arbitrators. Obviously, this an extremely difficult standard to meet. Consequently, next time you are signing a contract that contains an agreement to arbitrate, think carefully whether you would be comfortable going to arbitration on the matter. If you are not, you may want to renegotiate the inclusion of an arbitration clause.