An Agreement to Arbitrate Disputes Must Be Expressly Stated to Apply to All Parties to a Contract
Whether contractual dispute resolution provisions are enforceable and whether a court or arbitrator decides the scope of an arbitration clause have been frequent issues in Washington cases. A recent unpublished decision issued by the Division I Court of Appeals addressed a slightly different issue concerning whether one or both of the contracting parties assented to arbitration. In Kimaco, LLC v. Wright Development West Coast, LLC,the Contractor sought to compel arbitration of a dispute with the Owner arising out of construction of a hotel in Mukilteo, WA. The arbitration clause provided:
"In the event a dispute arises between [Owner] and Contractor, Contractor shall continue to perform the Work without interruption or delay, provided that [Owner] pays all undisputed amounts due Contractor. Contractor agrees to resolve any disputes arising from the Agreement by binding arbitration to be held in King County, Washington, in accordance with the rules of the American Arbitration Association then in effect." [Emphasis supplied]
In response to the Contractor's Motion to Compel Arbitration, the Owner argued that the contractual arbitration language established that only the Contractor consented to arbitrate disputes, and the Owner did not. The Owner focused on the words "Contractor agrees to resolve …." The Owner argued that because the contract language did not include any reference to the Owner agreeing to arbitrate, that the Owner had not assented to arbitration.
The Division I Court of Appeals agreed, holding that the contract terms plainly reflected the arbitration requirement was solely applicable to the Contractor and not reciprocal and thus the Owner was not required to arbitrate the dispute as demanded by the Contractor.
The lesson here is that both contracting parties must expressly assent to the arbitration and/or any other dispute resolution proceeding in the contract. This arguably includes mediation if the contract requires mediation as a condition precedent to further proceedings. It also reinforces that, despite Washington's public policy favoring arbitration of disputes, Washington courts will not find that a mutual agreement to arbitrate is implied. It must be express. Washington courts and the Division I Court of Appeals, in particular, likely will enforce contracts as written. The Kimaco court, as one would expect, cited to Satomi Owners Ass'n v. Satomi, LLC, 167 Wn. 2nd 781 (2009), in which Washington’s Supreme Court held that a unilateral arbitration provision is enforceable in Washington provided it is not an unconscionable.
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