Courts favor the enforcement of arbitration clauses as this binding form of alternative dispute resolution is beneficial to judicial economy and efficiency. Courts are willing to review the validity of the arbitration clause itself, but are reluctant to allow collateral attacks based on other provisions of the contract.
A recent case from Rhode Island is an example. Subcontractors argued that a “pay-if-paid” clause in the subcontracts violated state law and was void. The subs contended this voided the subcontracts in their entirety, including the arbitration clause. The Supreme Court of Rhode Island, however, ruled in favor of arbitration. The arbitrators could determine the enforceability of the pay-if-paid clause.
The other case in this issue involves what the Court of Federal Claims described as “a fundamental conflict” between best procurement practices and congressional favoritism toward small businesses. Could agency requirements for contract eligibility be superseded by the Small Business Administration?
