Arbitration Agreement is Presumed: What You Need to Know

When it comes to resolving legal disputes, the most common methods are through litigation or arbitration. While litigation involves a public court proceeding, arbitration offers a private alternative that can be quicker and more cost-effective.

Businesses and individuals who enter into contracts often include an arbitration clause to specify that any disputes arising from the agreement must be resolved through arbitration rather than litigation. However, there has been some controversy surrounding the enforceability of such agreements, especially in instances where one party claims that they did not fully understand or agree to the terms.

To address this issue, some courts have developed the legal principle of “arbitration agreement is presumed.” This principle essentially means that when there is an arbitration clause in a contract, it is presumed that the parties have agreed to it and intended for disputes to be resolved through arbitration.

The presumption of the arbitration agreement is based on the Federal Arbitration Act (FAA), which favors arbitration and sets out guidelines for enforcing arbitration agreements. The FAA applies to contracts involving interstate commerce, which includes many business agreements.

Courts have generally held that the presumption of an agreement to arbitrate can be overcome only by clear and convincing evidence that the parties did not intend to arbitrate disputes. This means that if one party challenges the enforceability of the arbitration agreement, they must be able to provide strong evidence that they did not fully understand the agreement or did not agree to it.

It is important for both parties to carefully review and understand the terms of any contract, including any arbitration clauses. If there are any concerns or questions, it may be advisable to seek legal advice before signing.

In addition, it may be helpful to include specific language in the arbitration clause that clarifies the intent of the parties to arbitrate disputes. For example, the clause could state that the parties have fully read and understood the arbitration provision and agree to its terms.

Overall, the “arbitration agreement is presumed” principle underscores the importance of carefully reviewing and understanding contractual agreements, including any provisions relating to dispute resolution. It is also important to seek legal advice when necessary to ensure that your rights are protected.