November 24, 2020 Articles

Carefully Draft Your Arbitration Clause—You Just Might Get What It Says

As courts generally apply the plain language of commercial arbitration clauses, lawyers should draft arbitration clauses, particularly bespoke ones, with care.

By A. Kelly Turner

When drafting an alternative dispute resolution provision for a commercial contract, lawyers can start with sample standard clauses that an administering organization such as the American Arbitration Association (AAA) and others provide. They also can use clause-drafting tools such as AAA’s free ClauseBuilder. Sometimes, though, lawyers decide to create their own dispute resolution clause either out of whole cloth or by tweaking the standard language. When that new, bespoke clause is applied to an actual dispute, however, one party might argue that the clause doesn’t mean what it says or should be read differently from its plain meaning. Whether there was a true misunderstanding between the contracting parties or merely legal drafting gone awry, courts usually hold the parties to the plain language they agreed to in the arbitration provision. This article reviews some court decisions in which the courts applied arbitration clauses as written with regard to arbitrator appointment and reasoned awards.

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