An arbitration clause requires disputes between parties to be resolved through private arbitration rather than in court, typically faster and more confidential than litigation, but with far more limited rights to appeal a decision.
Common in employment agreements, investor documents, and commercial contracts, often paired with a class-action waiver that prevents employees or customers from banding together in a group claim. Enforceability of both pieces varies by state and by the type of claim involved.
Arbitration can genuinely benefit a startup by keeping disputes private and resolving them faster than a lawsuit would, but it also means giving up a jury trial and most appeal rights. Worth understanding what's actually being traded away, not just accepting it as standard boilerplate.
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