California Injury Attorney Blog

Find the perfect location. You should research in what location of the city your business would be best- suited. Then calculate the overhead so you can see what you need to make per month. Different parts of the city will have different monthly lease costs. When obtaining your office /warehouse space, look into the city cost and then compare that to a smaller city.

Apply for an Employee Identification Number (EIN) number or a Doing-Business-As (DBA) name. After finding a building you will need to apply for a federal EIN number. This is a number for the Internal Revenue Service (IRS) to identify your business. They will also send to you all the new guidelines regarding your type of business. .

Register for a business license. Look on the Internet for your specific city or town. Each city has its own mandatory paperwork and definitions to define your business. Begin the process of registration y after securing your EIN/DBA name.

Set up a new bank account. You will need to have your EIN number or your DBA paperwork before obtaining a bank account. If you can afford an accountant, it's a good idea to have one. Lack of bookkeeping is one of the top reasons new businesses fail after opening a new bank account. As the owner of the business, you need to strictly maintain the books. If you're hesitant about your ability to manage your banking, an accountant will be an asset.

Find advertising space. A good business owner knows before they open how they will market their business. If you have written a business plan, you are well on your way. Starting a new business requires good advertising to bring in a steady flow of customers.

Stay current on your California Tax Laws. Make sure that you are aware of California tax obligations. Talk to your accountant or bookkeeper about keeping up with the laws.

Set up a web site. Today's customer always expects to find a business on line. You can hire a web developer or do it yourself. Strive to update the site to ensure a good search engine page ranking.

If you've never leased a vehicle before, the world of leasing may seem confusing. Leasing is a bit like renting a car long term, except that when the lease is up, you have a couple of options besides just returning the car to the dealership where you leased it.

Leasing a company car is a great option for cash-strapped businesses that don't have the money upfront to buy a vehicle. Leases are typically calculated on the amount by which the vehicle's value is expected to decrease during the lease period, so down payments and monthly lease payments are lower than you would pay if you bought a company car. A car that holds its resale value better will cost less to lease, as it loses less value over the lease term.

Be sure to compare any lease you're offered with others on the market before you sign a contract. Typically, a lease commits you to making payments on the car for three years, but other terms may be available says California Business Lawyer Steven C. Peck.

The following are other key factors to look at in a lease agreement:

•Capitalized cost: This is the lease price. You want to negotiate down the "cap cost" so it's significantly less than the manufacturer's retail price for the vehicle.
•Cap cost reductions: Be on the lookout for anything that might reduce your cap cost, such as factory rebates, dealer incentives, or the value of any trade-in vehicle you're offering the dealer.
•The money factor: This is lease-speak for the interest rate. The money factor will be stated as a decimal, which you multiply by 2,400 to get the interest rate. So a money factor of .00032 means an annual interest rate of 7.68 percent. The money factor may be influenced by a range of variables, including your lease length and your credit rating. Often the best money factors can be found in manufacturer-supported lease programs.
•Residual value: This is the car's value at the end of the lease. Unlike in car buying, where you won't know the car's worth three years from now until that day dawns, in leasing you agree upon a preset figure for what the car's value will be when the lease ends. You want a residual value set as low as possible because if the actual resale value at the end of the lease turns out to be more, you could buy the vehicle at the preset residual price and resell it for a profit or apply that equity to another lease or vehicle purchase. This is known as having positive equity at the end of the lease. If your vehicle turns out to be worth less on the open market than the residual value set in your lease, you're better off simply turning the car in and walking away.
Most dealerships offer lease agreements; but don't limit yourself to the dealer's offer. You can also lease a vehicle through an independent leasing broker. You can find an independent lease broker through the National Vehicle Leasing Association Web site.

Continue reading "Leasing Business Vehicles" »

The greatest advantage to running a business as a corporation is that, as with an LLC, the owners are protected from being personally liable for any losses, debts or obligations of the business itself. So, for example, if your corporation were sued and lost the case, the successful plaintiff would not be able to go after your personal belongings - the most you could lose is whatever you had actually invested in the company. In addition, because a corporation is an entirely separate legal entity from its owners, a corporation generally has an unlimited life beyond the life of its owners, lasting for decades or even centuries.

The other major advantage of a corporation is its ability to sell stocks, allowing investors to become partial owners of the company. It is therefore easier to raise capital with a corporation than with other types of business forms, because you can take your company public and allow anyone to become an investor/shareholder.

Continue reading "The Advantage of Corporate or LLC Formation Is the Protection From Personal Liability" »

Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).

When damages are not predetermined/assessed in advance, then the amount recoverable is said to be 'at large' (to be agreed or determined by a court or tribunal in the event of breach) says California Business Attorney Steven C. Peck.

At common law, a liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party (in which case it is referred to as a penal or penalty clause). One reason for this is that the enforcement of the term would, in effect, require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to the unjust enrichment of the enforcing party.

In order for a liquidated damages clause to be upheld, two conditions must be met. First, the amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. Second, the damages must be sufficiently certain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages. Damages that are sufficiently uncertain may be referred to as unliquidated damages, and may be so categorized because they are not mathematically calculable or are subject to a contingency which makes the amount of damages uncertain.

Continue reading "How Does A Business Determine Liquidated Damages?" »

Every business should protect proprietary information when dealing with independent contractors, vendors and other businesses. The best way to do this is to use a non-disclosure agreement, often referred to as an "NDA."

What is an NDA?

An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. The proprietary information can include business methods, finances, client lists, and anything that isn't already readily available in the public arena. If a party subsequently breaches the NDA, the injured party can sue for damages, an injunction against further disclosure and attorney's fees.

Directional NDA

In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to carry the thought through to their daily activities.

Practically every business hires independent contractors, but they rarely obtain NDAs prior to disclosing information to the contractors. For example, do you use third parties to create or maintain your websites? Did you obtain NDAs from any of them? If not, what's to keep that party from using your business methods on other sites? A directional NDA can keep this from occurring.

Mutual NDA

As the name suggest, a mutual NDA allows two parties to protect confidential information. The mutual NDA is typically used when two businesses are negotiating a joint venture. Each party must disclose enough information to make the negotiations viable, but neither wants that information made public if the negotiations fail. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the joint venture.

Refusing to Sign an NDA

Alarms and warning lights should go off if a party refuses to sign your NDA. Unless they can provide a very compelling reason for the refusal, you should walk away from the business relationship.

When an NDA isn't really an NDA

Just because a document is titled, "Non-Disclosure Agreement", does not mean it provides you with protection. You should ALWAYS read the language of an NDA because the document may establish that you are WAIVING all confidentiality rights. The waiver might be very direct and read something like, "The disclosure of information pursuant to this Agreement shall not be considered confidential." Alternatively, the language may be more indirect and read, "The parties acknowledge and agree that all information exchanged pursuant to this agreement has previously been established in public forums." Regardless, the "reverse NDAs" strip you of protection and should not be signed.

Continue reading "The Business of Obtaining Non-Disclosure Agreements For Your Business" »

There are times when a Business partner may decide that it is time to leave the partnership. Many times the Business partnership agreement will include details about how this is handled. The agreement may require that the Business partner first offer the remaining Business partners a buyout option, allowing them an opportunity to purchase his or her share/interest in the partnership before he or she tries to sell that share to some third-party says Woodland Hills, California Business Attorney Steven C. Peck.

If the Business partnership agreement is silent on the issue of what happens when a partner leaves, most states' partnership laws cover the issue. You should be very careful in this situation because the laws differ from state to state - however, in many states, the law says that the partnership automatically ends when any partner leaves.

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Your company needs a buy-sell agreement because change is constant,
and your relationship with your fellow shareholders will change. Shareholders bicker, lose interest in the business, go away, die, get divorced, get run over by trucks, etc.

Sometimes a shareholder gets a better job and stops putting time into your company. He's now a freeloader, and you don't want him to enjoy the benefits of your hard work in building up the business.
Sometimes a shareholder is such a malcontent that you must be rid of him. Or a shareholder might get divorced, in which case you don't want his spouse to take over his shares and become your partner. Or a shareholder might go bankrupt, and you need to protect the business from his creditors. In all these cases, the company needs a structure for the orderly and fair removal of shareholders.

The Economic Divorce. Enter the buy-sell agreement. When changes among the shareholders put yourcompany in danger, the buy-sell agreement forces a fair resolution. I call this the economic divorce - if the company cannot survive a particular shareholder, the buy-sell agreement gets you a divorce on terms that are fair to everyone.

Death. If a shareholder dies, the company buys his shares from his estate. This is fair to the surviving family because they usually want money, not shares in an illiquid small business. This is fair to the company because you don't want the deceased shareholder's spouse or son to show up and announce himself as your new partner. Usually you pay a death buy-back in one lump-sum using the proceeds of life insurance.

Disability. Similar to death (except without the finality) if a shareholder becomes disabled, the company buys his shares. The company can pay a disability buy-back using a promissory note.

Divorce. The divorcing shareholder buys out his spouse's entire community property interest in the company's shares. This is done in the divorce proceedings.

Disputes. Sometimes two shareholders just can't get along. To deal with this situation, you use"shotgun" procedures. This means that, between the two warring shareholders, the first shareholder offers to buy out the second shareholder, and the second shareholder has the choice, either be bought out or turn around and buy out the first shareholder on identical terms (i.e. I cut, you choose). Either way, a price is fixed for the buy-out, and one of the warring shareholders leaves the business.

Bankruptcy; Bad Transfers. If a shareholder transfers shares in violation of the shareholders agreement or goes bankrupt, the company can purchase all of his shares to keep the shares away from his creditors. This serves an asset-protection function.

Buy-out Price. The buy-out price is crucial. A high buy-out price gives the exiting shareholder a windfall. A low buy-out price is unfair and leads to litigation. The trick is finding a procedure that ensures a fair price - for example, using a neutral appraisal process to fix a price.

Variation for a Real Estate Venture. As a final note, for some businesses, instead of a traditional buy-sell, it's easier just to liquidate the entire business. This can be true where a business does not have goodwill. For example, the value in most real estate ventures is the real estate. There is neither goodwill value in the venture nor sentimental value in the real estate. With this in mind, if the shareholders can't get along, it's easy to liquidate the assets, distribute the profits and let the shareholders go their separate ways. This is pure economic divorce.

Continue reading "What items Should One Consider When Drafting the Business Buy-Sell Agreement?" »

A business is built on a series of interwoven agreements and relationships. Small business owners often trust that their personal relationships are strong enough to ensure that agreements will be honored. But a well-written contract not only helps enforce these agreements, it can also strengthen vital relationships.

What is a contract?

In simple terms, a contract is a legally enforceable agreement. The precise conditions that create an enforceable contract vary from state to state. But, a few basic elements must be present.

First, a contract must be something both parties have agreed to. Typically, this occurs when one party makes an offer or a counter offer, and the other party accepts that offer. Second, both parties must exchange something of value. A promise to do something, or not to do something, is sufficient. Third, the terms of the agreement must be sufficiently definite for a court to determine what the parties have agreed to.

Contracts can be written or oral, formal or informal. The best contracts are ones that explain what each party has agreed to do in plain language.

Why written contracts?

While oral contracts are enforceable, there are many reasons not to rely on them. First, every state requires that certain types of contracts be in writing to be enforceable. These requirements vary from state to state, and include both the obvious (contracts for the purchase of land) and the innocuous (contracts guaranteeing the debts of a third party). If you're dealing with an important agreement, it's best to make sure you've complied with the law by getting something signed and in writing.

Second, while it might seem counterintuitive, a written contract actually helps parties stay out of court. Most business disputes arise out of a disagreement about what the parties agreed to do, not one party simply refusing to do what it promised. Taking time to put an agreement in writing will help avoid misunderstandings that can lead to disputes and lawsuits.

What should be in a written contract?

Each contract is as unique as the underlying business relationship. However, every contract should cover a few key points. A contract for the purchase or sale of goods should usually contain terms like the parties involved, the time and place of delivery, the time and method of payment, the product description and the unit price. Cliff Ennico, small business author and lawyer, suggests business owners make sure certain elements are clear in their contracts: who is doing what and when; what are parties not going to do; how much is being charged; and, when payment is due.

Continue reading "A Well Written Contract Will Strenghten and Reinforce Business Relationships" »

In a general partnership, each partner has the ability to take actions which can legally bind the partnership and, thus, the other partners themselves (even if those other partners have not been consulted or given their approval). In other words, each partner has full authority to exercise management and control of the partnership. When owners do not want to have control fully and equally shared like this, they can change the management structure through the terms of the partnership agreement. However, there are certain duties and obligations that cannot be changed. For example, in all partnerships, the individual partners are always entitled to all information about the business, such as financial information, details about transactions, etc. Similarly, because there is a fiduciary relationship between the partners, they always owe the other partners a duty of good faith, a duty of loyalty, and a duty of fairness in dealing with transactions relating to the partnership (in other words - you can't screw over your partners).

As for the actual details about controlling and running a partnership, things can generally be as simple as you want them to be. While all partners in a general partnership (and all general partners in a limited partnership) have equal ability to conduct business, the major decisions are usually made by having the partners vote. While the votes may be based on the number of partners, most partnerships instead base them on partnership interests. Thus, if there are five partners, but one has a 60% interest in the partnership, he is essentially the controlling partner of the business. However, instead of this so-called "owner management," the partners can adopt a structure more like a corporation, appointing a managing partner or a president, vice-president, etc.

Partnerships do not generally have to hold any form of regular meetings, like corporations. Thus, the partners can simply hold meetings when and if they feel there are important things to discuss or vote on. Similarly, unlike corporations, partnerships generally do not have to file any annual reports with the state, listing the details of the business. As a result, there are not really any business documents which a partnership should maintain aside from those which it decides are useful and necessary for running a business. However, while not necessary, partnerships should consider keeping a partner ledger.

Continue reading "How Are General Partnerships Controlled and Managed?" »

It is an unfortunate fact of life: if you are in business today, you are going to have disputes. They may be contract disputes with suppliers or they may be claims made by your customers. They may be contract disputes or banking disputes. They may very well be disputes with your employees.
Many things can be done to avoid such problems, but this article is intended to deal with the methods in which those disputes can be handled.

There may be occasions where you simply have no input into the method of dispute resolution. There may be no contract in which you can make a choice, or no invoice in which you can insert a dispute resolution requirement. However, where the choice is yours, your basic options are to go to court and litigate, or to choose the alternative dispute resolution of arbitration. Both of those methods of resolution could include a side trip known as mediation, which is a good place to start.

MEDIATION
Irrespective of whether your ultimate dispute resolution may be litigation or arbitration, you may choose to include in your contracts an obligation to mediate before the matter is allowed to proceed. Mediation has become a cottage industry in the last 15 years, as many lawyers have chosen to emphasize their positions as mediators, rather than advocates, and many retired judges have set up shop as mediators.

Mediation is nothing more complicated than having a third party getting involved in your dispute, receiving information from both parties, and then sitting down to talk separately with each party in an effort to find some middle ground in which a settlement of the issues is possible. Mediators emphasize to the participants:

•The cost of arbitrating or litigating their claims;
•The uncertainly of that resolution; and
•The time and effort it will cost both sides to proceed past mediation.
With that framework, a mediator uses his or her training and skills to find a solution that both parties can live with, if not be excited about.

Most people would be amazed at the percentage of success rate enjoyed by mediators in finding a solution to often difficult and complicated issues. In addition to a skilled mediator, a successful outcome is going to depend, to a large degree, on both sides being willing to:

•Listen;
•Continue to engage in the process;
•Keep in mind the cost benefit ratios of moving on in the dispute process; and
•Put aside the "principal" involved.
ARBITRATION

If mediation does not resolve your issues, the alternative is to "try" your lawsuit. You can do that either in the traditional way in front of a court and a jury, or you can put your case before an arbitrator selected by the parties or one selected by the American Arbitration Association ("AAA"). The AAA is a national organization that provides qualified arbitrators (and for that matter mediators) in each jurisdiction and handles the administrative aspects of moving your dispute along to a final arbitration. Once the parties "try" their case to an arbitrator and that arbitrator gives a decision, it is virtually impossible to successfully appeal the result absent fraud on the arbitrator's part. The courts will generally reject an appeal from an arbitration award absent such fraud, and not even a clear error of law or fact by an arbitrator will cause a court to intervene.

The advantages of arbitration are:

•It is quicker than getting entangled in the legal system;
•More likely to result in a final resolution without any prospect of further appeals; and
•The usual "discovery period" provided for in litigation which involves the parties sending questions back and forth to be answered under oath, the parties demanding document exchanges, and the parties taking depositions of witnesses ahead of time, are for the most part reduced or eliminated in the arbitration system.
Offsetting those savings, are the costs of the arbitrator who charges on an hourly basis, and the costs of an organization such as the AAA. Those costs are generally split between the parties. Despite the administrative costs that exist in arbitration and not in litigation, everyone would agree that arbitration is quicker and less expensive than a traditional court setting.

COURTROOM TRIAL
Why then, do you ask, would anyone choose not to arbitrate? Probably because some of the advantages in arbitration turn to disadvantages in certain disputes. If your issues are extremely complicated and you have a concern that it is going to be impossible for an arbitrator to understand the complete story unless you have the opportunity to utilize all of the discovery techniques that are unquestionably available in litigation, you may choose a courtroom setting. In addition, many people believe that arbitrators may choose to "cut the baby in half" more often than a judge or jury would.

Trying your case to a court and a jury does give you the advantage of obtaining fuller disclosures through the discovery process. It also has some disadvantage, including the likelihood that no one on the jury is going to have the background, experience, education, and training of an arbitrator. Many lawyers believe that trying a very complicated piece of litigation to a jury is a major gamble and their client would be better off selecting an arbitrator with background in the industry in question.

Your attorney can help you make a decision about which of your contracts or agreements might prudently include an alternative dispute resolution provision mediation and/or arbitration as a method of resolving your issues depending on the amount of money involved, the complexity of the issues, and the collective view of what makes the most sense in your circumstances.

Continue reading "Business Dispute Resolution" »

One of the biggest advantages to forming a company as an LLC is that, much like C corporations, the owners/members are not personally liable for most losses or debts of the company itself. Thus, there is so-called limited liability and the owners can only, generally, lose whatever money has been invested in the LLC, and nothing more. However, personal liability can attach in certain instances, such as where an owner tries to defraud company creditors or do some other illegal act - in these cases, a court may apply alter ego liability. Similarly, limited liability does not protect an owner for acts taken outside of his or her capacity as a company owner/employee. For example, if an LLC takes out a $500,000 loan and one of its members personally guarantees the loan, the bank could go after that member's personal assets, despite limited liability. Of course, if a co-owner is the one who has committed some bad deed making them personally liable, you would not be personally liable just for being another co-owner, as long as you did nothing wrong (this differs from a partnership, where you are personally liable for your partners' wrong-doings).

fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

"A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence." says California Business Attorney Steven C. Peck.

A fiduciary duty[ is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.

Continue reading "The Fiduciary Relationship of Confidence or Trust" »

Embarking on a new business venture emboldens many entrepreneurs. With a solid business plan and capital assured, opening a new business promises new freedom. Simultaneously, many new businesses owners also feel somewhat overwhelmed. The key for initial success is careful planning.

Choosing the best organizational strategy for a new business creates long-lasting consequences. The choice should optimize ease of operation, protect personal assets, and remain affordable. Owners may consider an assortment of options. Each option includes a full complement of advantages and disadvantages.

The assistance of a skilled business lawyer provides new owners with keen professional insight and a ready source of expert answers for all legal questions. For example, a new owner may consider a sole proprietorship. In the most basic sense, a sole proprietorship is easy to maintain. Yet it provides little protection from personal liability and potential claims.

Operating a business as an individual may initially seem economical since you don't need to spend as much money setting it up. However, the long-term costs of selecting a sole proprietorship can be substantial. Sole proprietors have unlimited personal liability for business actives and the actions of all employees. In addition, tax-planning options are limited.

Multiple owners often consider a simple general partnership because of affordability since it does not require registration. Income earned by a partnership passes through to individual partners according to an agreement. Drafting a partnership agreement quickly becomes complex when partners desire to alter equal distribution of income, joint and several liability, or management authority. The best way to avoid future complications is to discuss agreement options with a competent commercial lawyer.

Corporations remain highly popular because of ironclad protection of personal assets and operational flexibility. A board of directors may delegate authority as needed and change profit distribution at will. Tax planning options and benefits also expand when using a corporation. Because of extensive regulation, consider the assistance of a commercial lawyer whose expertise is essential for legal compliance and maintaining all available benefits.

Limited partnerships include at least one general partner and additionally allow an unlimited number of limited partners. Frequently, a corporation becomes the general partner and individuals contribute capital for business formation. Limited partners are responsible up to but no more than the extent of their registered capital investment but have no management authority. New business owners may find this high degree of flexibility useful while limiting personal responsibility for business liability.

Limited liability companies are distinctly different from limited partnerships. A limited liability company passes income through similarly to a general partnership, but also insulates owners from liability similar to a corporation. The IRS does not consider a limited liability company as a taxable entity because of the pass-through feature. Frequently, with careful planning, a limited liability company may combine the best features of a general partnership and corporate protection while avoiding many disadvantages of both entities.

The advice and assistance of a business lawyer is vital when forming a limited liability company. In a few situations, a lawyer is not necessary to start a business, nevertheless, the prudent choice is to begin the operation all new businesses properly from day one. The risk of loss from legal noncompliance is simply too great. A single mistake could void all benefits and expose owners to unlimited liability and asset loss.

While limited liability protects the owners, directors and officers of a corporation, they may still be personally liable in situation where they have severely mismanaged the corporation.

However, it is very rare for directors to be found personally liable because of the business judgment rule. This rule basically says that a director will not be held personally liable for a bad decision as long as he or she was acting in good faith, was diligent in learning information relative to that decision and was not personally interested in the underlying transaction. This rule therefore provides a broad amount of protection to corporate directors.

Continue reading "The Business Judgment Rule" »

Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides. Other forms of ADR include mediation (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. Arbitration is most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is far more controversial in consumer and employment matters, where arbitration is not voluntary but is instead imposed on consumers or employees through fine-print contracts, denying individuals their right to access the courts says California Business Attorney Steven C. Peck.

Arbitration can be either voluntary or mandatory and can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable.

Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed will be final and binding.

Advantages and disadvantages:
Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:

When the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation)
arbitration is often faster than litigation in court
arbitration can be cheaper and more flexible for businesses
arbitral proceedings and an arbitral award are generally non-public, and can be made confidential because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments
in most legal systems, there are very limited avenues for appeal of an arbitral award

Some of the disadvantages include:
Arbitration may become highly complex
Arbitration may be subject to pressures from powerful law firms representing the stronger and wealthier party
Arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees sometimes do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job
if the arbitration is mandatory and binding, the parties waive their rights to access the courts and to have a judge or jury decide the case
in some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes
in some arbitration agreements and systems, the recovery of attorneys' fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation; however most arbitration codes and agreements provide for the same relief that could be granted in court
if the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee
there are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned. Although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays.

In some legal systems, arbitral awards have fewer enforcement options than judgments; although in the United States arbitration awards are enforced in the same manner as court judgments and have the same effect.

Unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought, thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.

Continue reading "Arbitration A Technique For The Resolution of Legal Disputes Outside The Courthouse" »