Arbitration Agreements: Protecting the Relationship Between Manufacturers and Raw Material Suppliers
For manufacturers, establishing a strong relationship with their raw material suppliers is critical. Without reliable and efficient access to quality raw materials, a manufacturing business cannot succeed. However, even the best business relationships can fall apart, and disputes may arise.
One way to prevent disputes from escalating into costly lawsuits is to include an arbitration agreement in the contract between the manufacturer and raw material supplier. An arbitration agreement is a contractual provision that requires any disputes between the parties to be resolved through arbitration instead of going to court.
There are several advantages to including an arbitration agreement in the contract with a raw material supplier. One significant advantage is that arbitration is usually less expensive and faster than litigation. In addition, many arbitration proceedings are confidential, which can help protect sensitive business information.
Another advantage of arbitration is that the parties have more control over the process and outcome. Unlike in court, where a judge or jury decides the outcome, in arbitration, the parties can agree on the arbitrator and the rules that will govern the arbitration. This can help ensure that the dispute is resolved in a way that is fair and reasonable to both parties.
However, there are also some disadvantages to consider. For example, the parties may not have the same rights to appeal the arbitrator`s decision as they would in court. In addition, some people believe that arbitrators may be more likely to favor the party that hires them, leading to bias.
While arbitration agreements are not without their drawbacks, many manufacturers and raw material suppliers find that the benefits outweigh the risks. To ensure that an arbitration agreement is effective, it is critical to include specific language that clearly outlines the rules and procedures that will govern the arbitration.
One important consideration when drafting an arbitration agreement is to decide who will choose the arbitrator. In some cases, the parties may agree to select an arbitrator mutually. In other cases, one party may have the power to choose the arbitrator, which could lead to allegations of bias.
Another consideration is whether to include a clause that requires the parties to attempt to resolve the dispute through mediation before proceeding to arbitration. Mediation is a process where a neutral third party helps the parties come to an agreement. It can be a less formal and less expensive way to resolve disputes than going to arbitration.
In conclusion, an arbitration agreement can be an effective way to protect the business relationship between a manufacturer and a raw material supplier. By including an arbitration agreement in their contract, the parties can ensure that any disputes are resolved efficiently and fairly. However, it is important to carefully consider the potential benefits and drawbacks of arbitration and to include specific language in the agreement that outlines the rules and procedures that will govern the process.
