If you thought you had a valid and enforceable arbitration clause, you might be mistaken.

By: Christopher Solop

If you are a lawyer, you have probably seen many different arbitration clauses. One “arbitration clause” that was determined not to be valid and enforceable was examined by the Mississippi Court of Appeals in Mississippi State Port Authority at Gulfport v. Southern Industrial Contractors, LLC, 271 So.3d 742 (Miss. Ct. App. 2018).  The language of the clause was as follows:

The Subrecipient [Port Authority] and the Contracted Party [SIC] agree to resolve all disputes by negotiations, arbitration, litigation, or other means as provided in the Contract documents and state law, prior to submission of any related change order or Contract Amendment to MDA for review and approval in order to obtain a grant eligibility or allowability determination.

Id. at 748.  (Emphasis added.)

When a dispute developed between SIC and the Port Authority, SIC gave notice of its intent to invoke what it thought was a right to select arbitration and subsequently filed a demand for arbitration.  The Port Authority opposed the demand, claiming it had a right to have the dispute resolved through litigation in the Circuit Court of Harrison County.  Notwithstanding the fact that the clause provided the parties “agree to resolve all claims by…arbitration” the Court agreed with the Port Authority.  

The Court determined that this provision “does not use express, unconditional language providing either party with the unilateral right to submit a dispute to binding arbitration.  Instead, it provides the parties with various dispute resolution options, none to the exclusion of the other.”  Id. at 749. The Court went on to state the language of the clause “basically serves to notify the parties that they were free to choose how to resolve their disputes by including a dispute resolution provision in the main Contract or by leaving the matter open to the options provided by state law.”  Id.  (Emphasis added.)

The Court did not explain why the right to select the dispute resolution mechanism was left to the Port Authority and not SIC, who was the first party to exercise its rights under the dispute resolution provision.  Nor did the Court consider the language to be ambiguous so as to be construed against the drafter, the Port Authority, even though it states the agreement of the parties is to resolve disputes by arbitration, among other means. Instead, the Court declared that the “plain language” did not constitute an agreement to arbitrate.

If the right to require arbitration of disputes is what you want, the lesson here is to make sure the language of your arbitration provision is not open-ended on the method of dispute resolution.  Make certain the language is “express and unconditional” that the only option for resolution of disputes arising out of or related to the contract is binding arbitration.  It would also be wise to specify the details for invoking the arbitration procedure and consider emphasizing the arbitration provision with bold font or complete capitalization to ensure it is called to the attention of the other party.