What is an arbitration clause?

An arbitration clause is a clause in a contract or agreement requiring the contracting parties to arbitrate, rather than litigate, in the event there is a disagreement or dispute regarding the terms of the contract. Arbitration is a form of dispute resolution where the disputing parties agree that one or several individuals can rule on the dispute after the presentation of evidence and the hearing of arguments. Arbitration clauses can prevent parties to a contract from suing in court if the arbitration clause is found to be valid.