Whether your web hosting plan provides for arbitration or disputes through court litigation. It is important to know this, even if you don't plan to sue your hosting company, because it is critical to knowing if you will be able to.
Does your web hosting company include an arbitration clause in its terms of service? This is an important question to know the answer to. If there is an arbitration clause, you have to mandatorily seek out arbitration if you want to seek damages, either from contract for a wrongful termination of the agreement.
If something goes wrong with your services, and if you want to claim civil damages against the hosting company - you would have to do it through arbitration proceedings. This can be very expensive. Merely appointing an arbitrator can be very expensive. Some arbitrators charge $5000 or $10,000 to merely accept a retainer.
Hostgator, one of the popular web hosting company places the following clause in its terms of service;
"15b.) Arbitration By using any HostGator services, you agree to submit to binding arbitration. If any disputes or claims arise against HostGator or its subsidiaries, such disputes will be handled by an arbitrator of HostGator's choice. An arbitrator from the American Arbitration Association or the National Arbitration Forum will be selected in the state of Texas. Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. All decisions rendered by the arbitrator will be binding and final. The arbitrator's award is final and binding on all parties. The Federal Arbitration Act, and not any state arbitration law, governs all arbitration under this Arbitration Clause. You are also responsible for any and all costs related to such arbitration."
As you should note - all the costs of arbitration are to be borne by you! That is extremely unfair and inequitable. It should at least be 50/50. If you are buying a hosting account for $3.96 per month, and you have to pay $5000 to appoint an arbitrator, and resolve a dispute. Further, even if you have other tort claims - such as interference or fraud (non-criminal fraud) those claims would also have to be determined by the arbitrator. This is very unfair. It takes away your right to a jury trial under the 7th Amendment (or the Sate's version of it).
Godaddy on the other hand does not include an arbitration clause, but only adds a waiver of jury trials;
"You agree to waive the right to trial by jury in any action or proceeding that takes place relating to or arising out of this Agreement.
Yahoo does neither. It makes you litigate in California. Which seems more just.
While although you would not think about suing the hosting company you buy from at the outset, you should know about it, because it is quite common for disputes to arise when you suffer damages from downtime. Say the site is down for 1 day - due to no fault of yours. You may have a cause of action for damages against the hosting company. You can not only sue them for actual damages - you can also sue them for consequential damages, ie. lost sales, lost advertisement revenue and loss of your online reputation. These can be significant as the uptime goes to your SEO reputation.
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