People frequently sign contracts which contain arbitration clauses.  Arbitration is a process where a third party (or a panel of third parties) hear the evidence in a case and decide the outcome.  This process is usually binding. Often these third-party arbitrators are attorneys in private practice who assist in the resolution of disputes.  There are many reasons arbitration clauses appear in contracts. Conventional wisdom dictates that arbitration is less expensive and faster than litigation in State or Federal Court.  Often that is the case, sometimes it is not.  In fact, sometimes the cost of arbitration is prohibitive in pursuing a customer for non-payment.  Thus, businesses should think about their circumstances when deciding whether arbitration of all disputes with customers is appropriate, or whether only certain types of disputes are to be resolved by arbitration.  Often, arbitrators award less in damages than a jury might award.  Thus, those who tend to face lawsuits in the personal injury context often attempt to contract for disputes to be resolved through binding arbitration.

In a recent unpublished opinion of the North Carolina Court of Appeals, a Plaintiff sought to avoid an arbitration clause in a contract with a senior living center.  The Trial Court agreed with the Plaintiff that since the arbitration agreement was not signed by the Defendant, the Defendant could not compel arbitration. The Court of Appeals reversed, and in so doing confirmed two key holdings regarding arbitration clauses.  First, public policy favors settling disputes by means of arbitration. Second, doubts concerning the scope of arbitrable issues will be resolved in favor of the party seeking arbitration. In addition to these holdings regarding arbitration, the Court of Appeals addressed the lack of a signature by noting that while a party’s assent to a contract may be shown by its signature, assent may be shown in other ways.

Often, people operate under the misapprehension that if an agreement is not in writing and signed, it is unenforceable.  For a variety of reasons, this is incorrect.  Certain agreements must be signed and in writing.  However, the majority of contracts are not required to be in writing.  The Court of Appeals made clear that an arbitration clause need not always been signed by both parties in order to be enforceable.  The Court can look to other factors to determine whether there was assent to the arbitration clause.

Whether arbitration is in your best interest is case specific.  In general, if there is an enforceable arbitration clause, a Court will have no choice but to compel arbitration.  However, even if an arbitration clause is contained in a contract, if neither party demands arbitration, the dispute can be resolved through litigation in State or Federal Court.  Sometimes, it makes a lot of sense to include an arbitration clause in a contract.  Other times, it makes no sense, but people still include such clauses.  Sometimes it makes a lot of sense to demand arbitration.  Other times, demanding arbitration is not in your best interest, and you should wait for the other side to do so by filing your lawsuit as if the arbitration clause was not there, thus making the opposing party demand arbitration.

If you find yourself facing a demand for arbitration, or if you have a contract you believe has been breached which contains an arbitration clause, one of our attorneys would be glad to speak with you regarding whether the arbitration clause is enforceable, and whether compelling arbitration is advisable.