If a Contract Provides that Disputes are Submitted to a Third Party, You’ve Got Yourself an Arbitration Agreement

Agreement Review by Udall Law Firm LLPGot agreements? As a business manager, yes you do and probably many covering the varied aspects of your business. Now it appears that if your agreement or contract names a third party to decide a dispute, then an arbitration agreement is implied within the meaning of the Federal Arbitration Act. That’s what the Second Circuit held this week in Bakoss v. Certain Underwriters at Lloyds of London, __ F.3d __, 2013 238708 (2d Cir. Jan. 23, 2013). This means that you can form an arbitration agreement without ever using the word “arbitration”.

If you’re wondering why this is important, it will mean that many contracting parties have unknowingly inserted an “arbitration agreement” into their contracts and that will carry with it all the enforcement provisions of the FAA. Furthermore, parties to such contracts may have lost their ability to have a court decide whether contracts as a whole are invalid under applicable law. (Currently, under the Prima Paint line of cases, the court may only hear objections to the validity of the arbitration agreement itself.) Additionally, if these arbitration agreements do not contain any provision for class actions, the parties to these contracts may lose their ability to bring any sort of collective action.

Make sure your agreements provide for what you need and want. The experienced business attorneys at Udall Law Firm, LLP can review your agreements and work with you to make changes as necessary. Call today at (520) 623-4353.

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