QUICK NOTE: UNENFORCEABLE LANGUAGE IN ARBITRATION PROVISION

imagesAlthough arbitration is a dispute resolution provision provided for in a contract, the scope of judicial review of an arbitrator’s award is still governed by law.  There are limited circumstances in which an arbitrator’s award can be challenged under the law.  One of those circumstances is not because a party believes that an arbitrator applied the incorrect law.  

 

In a recent construction case, discussed in more detail here, an arbitration provision provided that a party can essentially appeal/challenge an arbitrator’s award to the circuit court if the arbitrator applied the incorrect law.  The appellate court held this language was unenforceable because it attempted to expand the legal scope of judicial review of an arbitration award.  The issue, here, became more than just the unenforceable language but whether the entire arbitration clause should be deemed unenforceable.  In other words, the issue became whether the unenforceable language that expanded the scope of judicial review of an arbitration award could be severed from the provision such that the parties would still be required to arbitrate (hence, the importance of a severability provision in a contract) OR the entire arbitration provision should be deemed unenforceable.  This is a HUGE difference because in one instance the parties still can arbitrate absent the expanded scope of judicial review and in the other instance the arbitration clause is unenforceable in entirety and the parties would be required to litigate. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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