Definition: A formal dispute resolution process that's legally binding on the
parties
The difference between arbitration and a lawsuit is primarily
one of formality. For example, in arbitration, the formal rules of
evidence don't apply. Each side can go on and on with narrative
discussions, drawings and charts, and the arbitrator will take in
all of it and make a decision. There are no juries in arbitration.
Instead, usually one to three people specially trained in the
subject matter of the arbitration hear the case. Arbitrations are
heard much sooner than lawsuits can be scheduled. This can be
either good or bad, depending on which side you're on.
Unless specified as such in a contract's arbitration clause,
arbitrations are not final and binding. Either party can decide
that they don't like the outcome. Once an arbitration award is made
and a binding clause is in the contract, a court will make the
arbitration award an enforceable judgment.