Arbitration agreements are commonly used in business contracts, employment agreements, and consumer contracts to resolve disputes outside of court. This type of agreement is often used to save time and money as well as to avoid the uncertainty of litigation.

There are two types of arbitration agreements, namely, the ad hoc arbitration agreement and the institutional arbitration agreement.

Ad hoc arbitration agreements are agreements made between parties who select their arbitrator(s) and the applicable rules of the arbitration. This agreement is suitable for parties who want more autonomy over the arbitration process and prefer to have control over the selection and appointment of arbitrators.

Institutional arbitration agreements are agreements that are made between parties and institutional arbitration centres such as the International Chamber of Commerce (ICC), the London Court of Arbitration (LCA), and the American Arbitration Association (AAA). Under this agreement, the arbitration procedure is managed by the designated institution.

Institutional arbitration agreements are often preferred over ad hoc arbitration agreements by parties who want a more structured and predictable arbitration process. Institutions provide rules and procedures that ensure a fair and effective arbitration process.

It is important to note that an arbitration agreement must be carefully drafted to ensure it is enforceable. One key factor is to specify the scope of the arbitrator`s authority, which is the power to decide on the matters that fall within the arbitration agreement.

In conclusion, arbitration agreements are a prevalent method of dispute resolution in various industries. Ad hoc arbitration agreements are preferred by parties who want more control over the arbitration process, while institutional arbitration agreements offer a more structured and predictable process. It is essential to carefully draft an arbitration agreement to ensure it is enforceable and specifies the scope of the arbitrator`s authority.