What Should Be Included In An Arbitration Clause?

Posted August 15, 2025 in Uncategorized

An arbitration clause is a fairly standard clause in commercial contracts, including employment agreements. Many businesses favor arbitration as a dispute resolution method, as it’s faster, less expensive, and affords more privacy than civil litigation. However, there is no standard arbitration clause, so the contracts you see may have widely differing terms.

Because arbitration clauses often remove your ability to file a lawsuit for damages against the other party, it’s critical to have our Littleton, CO arbitration lawyer review any contracts presented to you to sign, to ensure they are favorable to your interests and that any included arbitration clause is effective, enforceable, and practical.

What To Include in an Arbitration Clause—and Why It Matters

Clear language: Vague or ambiguous language may not be enforceable in Colorado civil court. Using phrases like “parties can consider arbitration” or “may be subject to arbitration” may not be enough to force the other party to adhere to the arbitration requirement.

Proper scope: Be specific about what types of disputes must be settled in arbitration. You can make the scope as broad (“This agreement to arbitrate applies to all disputes, including contract claims, tort claims, and statutory claims, arising from or related to this agreement”) or as narrow (arbitration for tort claims only, with a liquidated damages provision) as you wish, as long as the scope is clearly stated and not overly restrictive.

Specific arbitration rules that apply: You can set specific arbitration rules, such as those set by the American Arbitration Association (AAA), JAMS (Judicial Arbitration and Mediation Services), or National Arbitration Forum. Setting firm rules ensures all parties are clear on expectations and can properly prepare their case.

Venue: You can choose where the arbitration will take place; in Colorado, Denver and Boulder are popular choices, although you could opt to have the arbitration session occur via video call with the other parties and the arbitrator. Failure to specify where the arbitration will take place can lead to unnecessary delays or disputes over whose “turf” the session will happen on. This is critical, because…

Choice of law: Your arbitration venue may determine which jurisdiction’s laws govern the proceedings. Colorado courts respect the parties’ right to choose which state’s laws will govern the contract. If you want Colorado’s laws to apply, then you must explicitly state this in the clause.

Number of arbitrators: Would you prefer one arbitrator or a panel? One person is less expensive, and the process usually resolves faster, although a panel of three may be more appropriate for complex business disputes or high-value claims.

Allocation of legal fees: Will each party pay their own cost of arbitration, or will the losing party be required to pay the legal fees of the winning party? In Colorado, the parties can agree to split the fees and costs or have the arbitrator determine who pays base on the outcome of their decision.

Good Contracts Have Detailed Arbitration Clauses

Arbitration can be an excellent way to settle business disputes, but only if your contract sets clear, specific ground rules for the process. Enforceability of your contract’s arbitration clause depends on its language and the laws governing the process. The legal team at Volpe Law LLC can draft solid arbitration clauses as part of your business contracts and review those presented to you. Our Littleton arbitration lawyer can also represent you in the process. Call us today for a complimentary discovery call.