The Significance of Arbitration Clauses

When you are a content creator, every business relationship you enter will have certain details that need to be specified.   

For example, what happens if one party breaches the contract? What if one party refuses to fulfill its obligations? How will disputes between the contracting parties be resolved?  

Whether you create content for TikTok, YouTube, Netflix, or even commercials for the local restaurant, the law will apply to your work.   

Among the different legal concepts and matters worth knowing, one will appear in most contracts: the arbitration clause. In this blog post, we look at arbitration clauses and everything else you must be familiar with to cover yourself. 

1. What Is an Arbitration Clause? 

An arbitration clause is a clause in a contract that stipulates the rules for resolving disputes between the parties.   

The clause may specify: 

• the type of dispute resolution  
• the location  
• the people involved  
• the procedure  
• and other details regarding the arbitration.   

The standard arbitration clause features a set of terms and stated agreements that solidify a deal between parties involved to not sue each other in case a dispute arises.   

With this concept in play, parties that cannot sue but want to have their troubles or concerns amended will resolve their disputes through arbitration. This one is a process that allows a third-party arbitrator who makes the decisions, not a court.  

The arbitration clause may be between the parties themselves or under an arbitration association. If the arbitration clause is between the parties, these ones agree to resolve their dispute by arbitration.   

Often the arbitration clause defines a specific arbitration association. Then, this association decides the rules and is responsible for the arbitration process. 

2. What Are the Different Forms of Arbitration Clauses? 

The average arbitration clause comes in two forms that the average content creator will run into: binding and non-binding.  

To best understand how both of these agreements work, let’s go over them in further detail:   

Binding arbitration clause 

This type of agreement focuses more on finality than anything else.   

With this clause, an arbitrator’s decision on a specific dispute will be final, and the courts will enforce it to the point where neither party can appeal or not follow the decision.   

In fact, more content creators today opt to follow this clause because it’s more decisive and makes for a faster deliberation process. 

Non-binding arbitration clause 

Although it is less common, a non-binding clause is still used in rare cases where finality isn’t preferred upon an initial agreement.   

With this clause, parties are free to reject the arbitrator’s decision and take the dispute to court to make a final determination. 

3. Why Have an Arbitration Clause in a Contract? 

Contracting parties generally agree on an arbitration clause to avoid expensive and time-consuming litigation. In addition, parties may choose arbitration over litigation because the process is simpler, quicker, cheaper, and more flexible than regular court proceedings.   

Moreover, arbitration is often done via telephone conference call or video conference. Courts can often be particularly slow and inefficient. In contrast, arbitration is a more expedient and cost-effective method to resolve disputes.   

Some contracting parties also agree on an arbitration clause to avoid making it a public dispute. This is because some disputes may be sensitive in nature, and parties may prefer that they remain confidential. 

4. How Is an Arbitration Clause Better Than a Traditional Lawsuit? 

Compared to a traditional form of suing and settling that many professionals are accustomed to, arbitration clauses provide a more productive experience with less hostility while resolving an issue much faster.  

Through this clause, parties that need to resolve their differences participate in a private ‘court’. Here, they take their discrepancies to a company such as AAA (The American Arbitration Association) or JAMS, where their issues can be heard by a single person or panel.   

Usually, the arbitrations are held by retired lawyers or judges.   

One perk of arbitrations is that the parties can jointly decide who the arbitrator or arbitrators will be. Good arbitration companies have numerous people to choose from, many of who have experience in the area of law you need.   

If you have a dispute over a film contract, you can choose someone with film industry law experience. This is a big difference from getting a judge in a state court with no experience in that area of law.      

5. When Should You Use an Arbitration Clause? 

Here are a few situations where you might want to consider including an arbitration clause in your contract:   

You want to avoid costly litigation  

Arbitration is often less expensive than litigation. Parties may agree on an arbitration clause to save costs and avoid having the dispute go to court.   

You want to reach a faster decision 

Arbitration is generally quicker than litigation. Plus, arbitration decisions are made within six months and can be as soon as three months. On the other hand, litigation is typically much longer, ranging from one year to multiple years.   

You want to keep the dispute secret  

Arbitration proceedings are often confidential. You can stipulate this in your arbitration clause.   

You want the flexibility to change the rules 

In arbitration, the parties may agree on an agreement subject to change. You may amend the contract at any time.   

You want to follow your own directions  

Some arbitration associations operate according to the rules and regulations of a particular jurisdiction. If you aim to use your own standards without another jurisdiction’s boundaries, an arbitration clause allows you to do so. 

6. Why Is It Important for a Content Creator to Be Aware of This? 

In this ever-growing industry, content creators need to become more aware of how arbitration clauses work. That is because the need to use these clauses comes up more often than you would expect.   

With the field of content creation still being fully defined and understood in the context of American law, various oversights or miscommunications can negatively affect a creator during a contract.  

Thankfully, having an arbitration clause in place makes it possible to avoid any costly lawsuits. This clause can be amicably settled so that you can protect your growing career.   

The Wrap 

An arbitration clause is a clause in a contract that stipulates the rules for resolving disputes between the parties. These disputes can be commercial, private, or public sector disputes. Additionally, parties agree on an arbitration clause to avoid expensive and time-consuming litigation.  

At Creators’ Legal, most of our contracts contain binding arbitration clauses. As a content creator, you need to have a good grasp of the ins and outs of the arrangements that will help you protect your rights.