What is an arbitration clause in a contract?

An arbitration clause in a contract serves as a specific provision that requires the parties involved to resolve disputes through arbitration rather than through traditional court litigation. This means that if a disagreement arises regarding the interpretation or performance of the contract, the parties must present their case to an arbitrator or a panel of arbitrators, who will make a binding decision on the matter.

Incorporating an arbitration clause can streamline the dispute resolution process, typically making it faster and less formal than going through the court system. It often aims to reduce the costs associated with legal disputes and provides a private setting for resolution, which can be advantageous for parties wishing to avoid public scrutiny.

The other options do not accurately describe the purpose or function of an arbitration clause. A clause that allows for revisions pertains to altering the terms of the agreement, a notice to terminate deals with ending the contract, and a declaration of validity speaks to the legitimacy of the contract itself. None of these involve the specific mechanism for resolving disputes that is central to an arbitration clause.