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Binding arbitration is likely to be enforced by courts, except in rare cases. Make sure you are willing to be bound by arbitration rulings when you agree to arbitration clauses.

Many small businesses enter agreements to submit disputes to arbitration. When these provisions are present, Colorado courts are likely to uphold the agreement to arbitrate and are unlikely to overrule the arbitrator’s decision.

Important Tip We often recommend arbitration clauses for most small businesses - but when a small business is subject to losing extremely valuable rights (like franchise rights), it is important to consider these clauses carefully.

In this case, a franchisee of three Quizno’s restaurants agreed to submit disputes to binding arbitration in one of the three agreements. This agreement provided that this agreement and all other agreements were to be subject to arbitration. The other two agreements were silent as to arbitration – and actually provided for disputes to be decided by courts. However, the arbitrator ruled that arbitration was applicable to all three agreements.

In the arbitration, the arbitrator ruled that the franchisee had violated the agreements and allowed the Quizno’s franchisor to terminate the agreements.

When the franchisee challenged the arbitrator on these rulings, the court ruled that the arbitrator’s decision would be followed unless the arbitrator manifestly disregarded the law. Because of this standard, the court supported the arbitrator and ruled for the Quizno’s franchisor.   The only cases where an arbitrator’s decision is likely to be overruled is where there is corruption, fraud, misconduct or where arbitrators exceed their powers.

Additional Information
Important Tip: 
We often recommend arbitration clauses for most small businesses - but when a small business is subject to losing extremely valuable rights (like franchise rights), it is important to consider these clauses carefully.
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arbitration rights