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Arbitration Agreement Essay

4479 words - 18 pages

Essentials

According to Section 9(1) of the Arbitration Act, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement and the award must be in writing. An arbitration agreement can be made orally. Such an agreement is called a submission. An award of an oral arbitration cannot be enforced as a judgement of the court but only by an action on the award in that the party with the favourable award will have to bring a fresh action for breach of covenant .
The Arbitration Act 2005 (the Act) will ...view middle of the document...

The issue of whether mutuality is essential in arbitration agreement is never settled. There are two views pertaining to this issue. First, mutuality is essential for the validity of arbitration agreement. In the case of Union of India v Bharat Engineering Corp. , the court held that “since the arbitration clause was unilateral, giving only the contractor an option to refer the dispute to arbitration, hence, as such it was not an arbitration agreement”. This clearly shows that mutuality is essential in arbitration agreement. The second view is mutuality is not essential for the validity of arbitration agreement. This is illustrated in the case of Swee Pte. Ltd. v Lim Kian Chai where the court held that only the plaintiff could invoke arbitration and thus make arbitration available as an alternative to litigation. Resort to arbitration was plainly unilateral and there was simply no arbitration provision on which the defendant could rely. The rights to arbitration rested exclusively in the agreement.
There also an issue whether a subsequent contract entered into between the parties is also bound to arbitration as it is in the main contract where in the subsequent contract has no express provision of arbitration agreement. The answer is no as each contract stands by their owned. The main and the subsequent contract are separate with each other and they maintain their own arbitration agreement. If the parties want arbitration to be applied to the second contract, they must make a separate arbitration agreement for that particular contract. In the case where the arbitration clause was contained in the main lease agreement, then, when a subsequent agreement was signed in respect of the same premises containing no arbitration clause, it was held in Alagappa Chettiar v Palanivelpillai that the arbitration clause in the main lease does not cover disputes arising out of the subsequent agreement and an arbitrator appointed under the arbitration clause of the main lease would have no jurisdiction to deal with such disputes.
The courts have given recognition to the doctrine of separability of the arbitration clause. The effect of this doctrine is that an arbitration clause will be held to survive regardless to the fact that the main contract entered by the parties has been declared as void. In addition, arbitration clause would survive to cover disputes that had arisen before the contract was avoided .The court held in the case of Harbour Assurance Co. , initial invalidity of an arbitration clause or its subsequent termination by repudiation did not affect the validity of the contract because the arbitration clause was a separate and severable agreement. If a contract was terminated for breach by an acceptance of repudiation and by frustration, the arbitrator was still entitled to deal with the disputes flowing from the ending of the contract. The only exception to the doctrine of separability is where the contract itself is challenged to be void ab...

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