An arbitration agreement is a legal document that outlines the process for resolving disputes between parties outside of court. It is a contract, like any other, and as such, it contains certain terms that are implied without being explicitly stated. Here are four of the most important implied terms in an arbitration agreement:
1. Good faith and fair dealing
The concept of good faith and fair dealing is implied in almost all contracts, including arbitration agreements. It means that both parties agree to act honestly, fairly, and in good faith when interpreting and performing the terms of the agreement. This includes honoring the agreement`s requirements for selecting an arbitrator, following the agreed-upon procedures for submitting evidence and making arguments, and engaging in the process in a way that is professional and respectful.
2. Confidentiality
Confidentiality is often an implied term in arbitration agreements because it is critical to the success of the process. Parties who opt for arbitration typically do so to avoid the public scrutiny that comes with a court proceeding. Therefore, they expect that the details of their dispute will remain confidential. While some arbitration agreements explicitly state the parties` confidentiality obligations, many do not. However, it is generally understood that the parties have a duty to keep the proceedings and any information disclosed during them confidential.
3. Scope of the agreement
An implied term of an arbitration agreement is that it only covers the issues specified in the agreement. This means that the agreement`s scope is limited to the disputes the parties have agreed to submit to arbitration. If a dispute arises that falls outside the scope of the agreement, the parties may have to resolve it through other means, such as litigation.
4. Finality
Another implied term in most arbitration agreements is that the arbitrator`s decision is final and binding. This means that once the arbitrator renders their decision, the parties must accept it and cannot appeal the decision to a court of law. This is one of the primary benefits of arbitration for parties who are looking for a more efficient and cost-effective way to resolve disputes. However, parties should be aware that there are limited circumstances in which an arbitration decision can be challenged, such as if there was misconduct by the arbitrator or if the decision was obtained by fraud.
In conclusion, understanding the implied terms of an arbitration agreement is essential for parties who are entering into this kind of contract. These four implied terms – good faith and fair dealing, confidentiality, scope of the agreement, and finality – are critical components of any arbitration agreement and should be carefully considered by all parties involved in the process.