What is arbitration clause?

An arbitration clause is contract language requiring disputes to be resolved through private arbitration before an arbitrator rather than in court. It appears in terms of service, employment agreements, and purchase contracts, and is generally enforceable under the Federal Arbitration Act, which routes most disputes covered by such a clause out of the court system entirely, including out of class action lawsuits.

An arbitration clause is one of the most common reasons a person cannot join a class action even when they suffered the same harm as everyone else: courts regularly compel individual arbitration when a valid clause covers the dispute. Clauses vary in scope, opt-out windows (some contracts give a short period to reject arbitration in writing), and whether they name a specific arbitration provider such as AAA or JAMS. Reviewing the contract or terms of service that governed the transaction is the only way to know whether one applies.

Last reviewed 2026-08-22.