High-Low Arbitration: A Comprehensive Guide to Its Legal Framework
Definition & meaning
High-low arbitration is a specific type of arbitration where the parties involved agree on a predetermined range for the final award before the arbitration begins. This agreement is kept confidential from the arbitrator. The arbitrator will then make a decision, but the final award will be adjusted to fit within the agreed-upon high and low limits. If the arbitrator's decision is below the minimum amount, the award is automatically raised to that minimum. Conversely, if the decision exceeds the maximum, it is reduced to that maximum. This method ensures that both parties have a clear understanding of the potential outcomes, providing a level of predictability in the arbitration process.
Legal use & context
High-low arbitration is commonly used in civil disputes, particularly in personal injury cases and contract disputes. It allows parties to manage their risks by establishing clear boundaries for the arbitration outcome. Users can often handle the necessary agreements and documentation through legal templates available on platforms like US Legal Forms, which are drafted by qualified attorneys. This process can help individuals navigate the complexities of arbitration without needing extensive legal expertise.
Real-world examples
Here are a couple of examples of abatement:
In a hypothetical arbitration case between two parties, A and B, A claims damages of $300,000, while B is only willing to pay $70,000. They agree that:
- If the arbitrator awards less than $70,000, A will receive $70,000.
- If the award exceeds $300,000, A will receive only $300,000.
This agreement ensures that both parties have clarity on the possible outcomes of the arbitration process.