In arbitration a neutral third party without a jury takes testimony under oath and receives evidence just as a judge would in court, but in an informal setting. The arbitrator then makes a finding or "award" similar to a ruling by a judge.

Non-Binding Arbitration.The parties have the discretion to abide by the arbitrator's decision and retain the right to take the dispute into court. Parties generally do not choose this form of arbitration because most consider it a waste of money. Why go through the time and expense if the parties can ignore the outcome?

Binding Arbitration. The parties waive their right to go to court and the arbitrator's decision becomes final and binding. The decision is fully enforceable in court.

Advantages. Arbitration tends to be faster and less expensive than litigation in the courts. Discovery is limited, which significantly reduces expenses. Because there is no jury, the hearing is faster and presentation of evidence is less formal. This dispute is confidential since is does not appear in public court records.

Disadvantages. Generally, the decision, even if flawed, cannot be appealed. However, provisions can be added to the arbitration agreement that all for judicial review. Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334. Unless agreed otherwise, the rules of evidence are relaxed, which means hearsay evidence may be permitted. The fact that discovery is limited (which keeps costs down) may mean that parties are going into the arbitration without a full picture of the strengths and weaknesses of the case.