By Bruce Jervis
Arbitration clauses are interpreted liberally in order to give full effect to this alternative method of dispute resolution. If there is a close call on the arbitrability of an issue, including questions regarding the scope or application of the clause itself, courts generally favor arbitration. But there must be limits.
Arbitration is a creature of contract. It is binding against parties only when they have consented to arbitrate disputes arising out of or relating to the contract containing the arbitration clause. Parties should not be required to submit other disputes to arbitration. Yet this is exactly what an Ohio court recently mandated.
A construction contract called for binding arbitration. A dispute arose after completion of the work. Although the dispute could have been submitted to arbitration, the parties elected not to do so. They negotiated a settlement. They signed a settlement agreement which extinguished all rights and released all claims under the construction contract containing the arbitration clause. When a dispute arose under the settlement agreement, however, the Ohio court ruled the dispute was subject to the arbitration clause in the construction contract.
Isn’t this a judicial imposition of arbitration on a contract, the settlement agreement, which contained no arbitration clause? How could the arbitration clause in the construction contract survive when all rights under that contract had been expressly extinguished in the settlement agreement? I welcome your comments.
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