Arbitration is a private, out-of-court dispute resolution process—usually between parties to a contract—in which the dispute is resolved by one or more arbitrators rather than by judges and juries in the court system. Businesses often include an arbitration provision in the dispute resolution section of a wide variety of contracts or agreements with other business entities.
In Texas, arbitration is governed by both federal and state laws. The Federal Arbitration Act (FAA) applies to arbitration agreements that involve interstate commerce, which can cover a wide range of business contracts. Additionally, the Texas Arbitration Act (TAA) governs arbitration proceedings within the state. The TAA is similar to the FAA and applies to any written agreement to arbitrate a dispute that does not involve interstate commerce. Under these laws, arbitration clauses in contracts are generally enforceable, and parties can agree to arbitrate disputes instead of going to court. Texas courts will enforce valid arbitration agreements and can compel arbitration if one party attempts to avoid the process. Arbitration in Texas is favored as a means of resolving disputes efficiently and privately, and the decisions of arbitrators, known as awards, are binding and can be confirmed by a court, making them enforceable as a judgment.
