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Is a Binding Arbitration Clause Really Binding in Virginia? An Alexandria Business Dispute Attorney Weighs In

Business and Commercial Disputes By Binnall Law Group - 2021/10/22 at 01:04pm

Binding arbitration clauses are standard boilerplate language in many Virginia contracts. Unfortunately, most people skip over them. Some figure that they have no choice but to agree to the clause, while others assume arbitration will provide a fair, low-cost option for resolving a dispute. 

These assumptions often prove incorrect. Arbitration proceedings can work to your disadvantage, so there are situations where it makes sense to negotiate to have a binding arbitration clause revised or removed. 

But what if it’s too late and you’ve already signed a binding arbitration clause? How binding is it? An Alexandria business dispute attorney reviews statutory language and court interpretations to see the options.

What is a Binding Arbitration Clause in Virginia?

A binding arbitration clause is a provision written into a contract between two parties that requires them to settle disputes through binding arbitration rather than a lawsuit in court. In a traditional lawsuit, a judge or jury hears evidence permitted under standard rules and issues a decision that may be appealed to a higher court. By contrast, when a matter is settled through arbitration, an “arbitrator” hears the evidence, which may be substantially limited by administrative arbitration rules. The arbitrator is supposed to be a neutral third party like a judge, but there are times when an Alexandria business dispute attorney hears allegations of partiality when a professional arbitrator is involved in many of the same types of cases. 

The “binding” part of a binding arbitration agreement is two-fold. First, the arbitration decision itself is binding, meaning that it carries the same weight as a decision issued by the court. Second, the provision requiring settlement through arbitration rather than the courts is binding in that both parties give up their right to settle their differences through the legal system. 

Virginia Has Adopted the Uniform Arbitration Act

Part of the Uniform Arbitration Act codified in the Virginia statutes at Va. Code §8.01-581.01 specifies that if parties agree in writing to submit an existing or future controversy to arbitration, that agreement is considered “valid, enforceable and irrevocable” unless there are contractual grounds that would make it unenforceable. 

This creates a presumption that a binding arbitration clause is truly binding. 

Rebutting the Presumption – When a Binding Arbitration Clause is Unenforceable

It is necessary to approach agreements on a case-by-case basis to determine whether a binding arbitration clause is unenforceable and therefore does not actually bind the parties to that agreement. As with other contractual provisions, a clause requiring parties to settle disputes through arbitration may be set aside if one party used undue influence, duress, or misrepresentation to get the other to agree to the provision.

For instance, if an employer reviewing paperwork with an employee told the employee they could skip over reading the section about binding arbitration because it wasn’t important, that misrepresentation could provide grounds to make that provision unenforceable. An Alexandria business dispute attorney could review the situation in a particular case to determine whether a binding arbitration provision could be set aside due to fraud or other circumstances. 

Consult an Alexandria Business Dispute Attorney for Assistance with Arbitration Clauses

Whether you want to include a valid, binding arbitration clause in a new agreement or you are trying to gauge the enforceability of a binding arbitration clause already executed, it can be helpful to talk to an experienced Alexandria business dispute attorney

Depending on the situation, binding arbitration could provide a quick, cost-effective way to resolve disagreements. But it is important to understand your options and the possible ramifications before you proceed. To learn more, schedule a consultation with one of the knowledgeable dispute resolution advocates at Binnall Law Group.