Texas Arbitration Agreement Consideration: What You Need to Know

In Texas, arbitration agreements are common in employment contracts and business transactions. These agreements require parties to resolve any disputes through arbitration instead of going to court. However, for an arbitration agreement to be enforceable, it must have valid consideration. This article explains what Texas law considers valid consideration for arbitration agreements.

What is Consideration?

Consideration is a legal term that refers to something of value that is exchanged between two parties. In the context of arbitration agreements, consideration means a promise by each party to give up their right to sue in court in exchange for the right to arbitration. In other words, there must be mutual promises or obligations between the parties to make the arbitration agreement enforceable.

Valid Consideration for Arbitration Agreements in Texas

In Texas, courts have held that continued employment or continued business dealings are not enough to make an arbitration agreement enforceable. Instead, Texas law requires that there be additional consideration beyond what the parties are already obligated to do. This additional consideration must be something that has a tangible or economic value.

For example, an employer may offer an employee a signing bonus, a promotion, or a pay increase in exchange for signing an arbitration agreement. For business transactions, a party may offer a discount or other benefit in exchange for the other party`s agreement to arbitrate disputes.

The key is that the consideration must be specific and related to the arbitration agreement. The parties must clearly understand what they are giving up and what they are receiving in return. If the consideration is vague or unrelated to the arbitration agreement, it may not be valid.

Conclusion

Arbitration agreements are a common way to resolve disputes in Texas, but they must have valid consideration to be enforceable. Texas law requires that there be additional consideration beyond what the parties are already obligated to do. The consideration must be specific and related to the arbitration agreement, and it must have a tangible or economic value. Before signing an arbitration agreement, it is important to understand what you are giving up and what you are receiving in return. As a professional, I hope this article helps you understand the importance of valid consideration in Texas arbitration agreements.