If you’ve followed this series from inception you already know that the decision to agree to arbitrate disputes arising out of a transaction, and if so, under what terms, can be as important as any other decision a business must make about price and performance terms. Armed with sufficient knowledge about how arbitration and arbitration-law works, business people and their lawyers can make better-informed choices about arbitration, including whether seeking advice from an attorney with arbitration and arbitration-law experience is warranted in the circumstances. All else equal, a business that makes informed choices about transaction terms—including dispute resolution terms—increases the odds that the transaction will work as the parties intended.

Knowledge of how arbitration agreements are structured and how they work is essential to appreciate the risks and benefits associated with arbitration. Part II.B of the series is designed to introduce the basics of pre-dispute-arbitration-agreement structure and function. This Part II.B.1 focuses on the nature of the pre-dispute promise to arbitrate, how that promise is implemented by the post-dispute submission and the nature and extent of the power parties delegate to an arbitrator by way of their submission.

The Pre-Dispute Arbitration Agreement: A Promise to Submit Disputes to Arbitration

Most pre-dispute arbitration agreements are simply mutual promises to submit to an arbitrator or panel of arbitrators a narrowly or broadly defined universe of disputes or types of disputes that might arise in the future. Sometimes the agreement designates an arbitrator or panel of arbitrators to whom disputes will be submitted; other times it sets forth a procedure by which the parties appoint arbitrators each time a party demands arbitration, which enables the parties the opportunity to select the arbitrator or panel they believe best suited to resolve the particular disputes to be determined in a particular arbitration proceeding.

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