Before Signing a Contract You Should Know………..

Many people fail to read and understand the provisions of their contract for goods or services until it’s too late. Almost eighty percent of a standard contract regulates the positive relationship between parties, focusing on the excitement of “who gets what, for how much, and when.” Think about the last time you bought or leased a house, apartment, or car; took a new job; or hired a new service.

Contract Provisions for a Dispute

We use contracts regularly, and some parties spend little, if any, time understanding the legal consequences they face if they fail to abide by the terms of a contract. A contract’s default provisions regulate the outcome of a breach that invariably includes aggrieved parties damages, attorney fees, and costs. A default provision in a contract can even dictate the jurisdiction or the process by which a dispute can be adjudicated. Will a disputed matter be heard in court or at arbitration?

Arbitration

Arbitration is a formal alternative to litigation and is generally considered a more efficient process than litigation because it is quicker, less expensive, and provides greater flexibility of process and procedure. While they may seem efficient, arbitration provisions tend to be found in more boilerplate (standard or difficult to change) contracts that often put the individual at a disadvantage.

Arbitration Board Location

Arbitration clauses can dictate where a dispute can be heard and by a pre-designated arbitration board. Signing a contract with an arbitration clause can be expensive for an aggrieved party who might find themselves having to pay for out-of-state travel or legal representation.

In arbitration, the parties to a contract agree to have their case reviewed by a third party that is not a judge (although many arbitrators are retired judges). Arbitration involves using a neutral party to both review and help settle the dispute. Arbitrators are bound to apply the laws of their jurisdiction. Arbitration helps keep a legal matter from going to court and can be either mandatory or voluntary.

Mandatory or Voluntary Arbitration

Mandatory binding arbitration is a contract provision that requires the parties to resolve contract disputes through arbitration. If an arbitration clause is included in a contract, and if the contract itself is valid, the parties are required to abide by the clause. Once you have signed a contract with a mandatory arbitration clause, you will have no choice but to settle your dispute through arbitration.

Another possibility is voluntary arbitration. In this instance, the parties agreed on their own to use arbitration to settle their dispute. No contract or law requires this action. Most often, parties choose to use arbitration to save money, ensure confidentiality, and save time, and sometimes even for goodwill. If the matter is personal, such as in a divorce proceeding, voluntary arbitration can be equally valuable to both sides.

In arbitration, the parties agree to accept the ruling of the arbitrator and understand that the arbitrator’s decision is final. An aggrieved party may only take the decision to Court by appealing or to collect from their judgment.

Appealing a Decision

Appealing an arbitrator’s decision is difficult. Case law states that when a court reviews an appeal from arbitration, courts should avoid looking at the facts of the case or the merits of the decision. Rather, the court should determine if the arbitrator was fair, biased, or even tainted by fraud. This is an extremely high standard, and the courts most often defer to the arbitrator absent fraud or overt bias. The courts must find that an arbitrator’s decision was so unfair as to be manifestly unreasonable.

Failure to Comply With Arbitration Award

When a party fails to follow an arbitration award, the award recipient may take their award to court and seek judicial enforcement. Absent any showing of deprivation of due process, the judicial review will generally affirm the award rendered through the arbitration process and allow for its later enforcement.

About the Author: For over 25 years, Michigan attorney David Soble has advised business leaders, banks, lenders, real estate investors, and individuals on their legal matters concerning real estate, business, financial, and mortgage disputes. He has authored three books and has had hundreds of articles published monthly in over 250 national periodicals and newspapers.

About David Soble: David is a seasoned real estate and finance attorney with more than 35 years of experience, combining his background as a “big bank insider” with a commitment to demystifying complex legal issues for his clients.  As the founding attorney of Soble Law (also known as Soble PLC / Proven Resource), he leads a specialized team in Michigan and Ohio that handles real estate transactions, contract disputes, probate, and financial litigation.  Known for a practical, no-nonsense approach and peer-rated excellence (Martindale-Hubbell AV Preeminent), Soble and his team strive to protect clients’ property and financial interests with clarity, integrity, and experience.

Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own qualified attorney.