How Does an Arbitration Clause Work in Maryland?

An arbitration clause is typically inserted into a contract as a means of alternative dispute resolution. While not appropriate for every agreement, arbitration clauses often provide valuable benefits to companies, employers and businesses by reducing the potential costs that could occur if a contract or other dispute goes to court.  . The Heyman Law Firm can help you draft appropriate arbitration clauses and litigate their enforceability in the event of a dispute over whether the clause is enforceable. Our firm is here to explain how arbitration clauses work in Maryland.

When is an Arbitration Agreement Valid?

Arbitration clauses are an agreement between two or more parties to resolve a legal dispute outside of a courtroom, typically with the assistance of one or a panel of three arbitrators. If you signed a contract that contains an arbitration clause, you should know whether the arbitration clause will withstand legal scrutiny. The Maryland Uniform Arbitration Act (MUAA) governs laws regarding the use of arbitration clauses in Maryland. The MUAA states that written arbitration agreements normally cannot be revoked if they are deemed to be valid and enforceable.

Arbitration clauses are often enforced if it is determined that the parties to the contract drafted a valid contract and ensured that the contract had adequate consideration. Consideration is typically an exchange of services or possibly a promise to refrain from a certain action for payment. If you believe that the arbitration clause in your contract should be invalidated, you can challenge a contract on the following grounds:

• Waiver – A party to the contract acted in a manner that unambiguously showed that they were not settled on seeking arbitration to handle any legal claims. For example, if a party filed suit in a court rather than commencing arbitration, this would be a waiver.
• Fraud – A party to the contract misrepresented or omitted a material fact to deceive the other party into signing the contract’s arbitration provision.  General fraud is not enough — the fraud must be directed to the particular clause.
• Duress – A party to the contract was threatened or coerced into signing the contract against their best interest.
• Unconscionability – One party to the contract did not have an equal or sufficient amount of bargaining power before they entered into the contract.

If an arbitration clause is deemed to be invalid because the underlying contract was invalid, the parties to the contract are not bound to the terms of the arbitration agreement. To learn more about arbitration clauses, you should continue reading and speak with an experienced Maryland business advisory lawyer.

Staying or Compelling Arbitration

If a contract is equipped with an arbitration clause, the parties may not agree on whether the clause requires arbitration. When this happens, a party to the contract typically submits an application to stay or compel arbitration after the other party has filed suit. The court which is handling the case will then be tasked with determining whether the arbitration agreement covers the issue in question.

When analyzing arbitration clauses, Maryland courts look at the validity of the clause and how it can be applied to the legal issue. Once a court decides what topics the arbitration clause is designed to handle, the court will look at whether the legal issue fits within the scope of the agreement and whether, after examining several factors, the clause is enforceable.

If you signed a contract with an arbitration clause and you are now involved in a contract dispute claim, the Heyman Law Firm can help you pursue a resolution to your claim.  Our firm can help you examine a contract with an arbitration clause before you sign the contract to ensure that the terms of the contract are not unfair to you. Our Towson contract dispute lawyers can also help you pursue an argument that an arbitration agreement was not valid if the facts and law support it.

Our Trusted Baltimore Business Litigation Lawyers are Ready to Work with You

If you have issues with an arbitration clause in one of your business contracts, you should contact an experienced Baltimore business litigation lawyer today. The legal team at the Heyman Law Firm possess decades of combined legal experience, and they will utilize that experience to pursue the legal outcome you deserve. To schedule a confidential legal consultation, contact the Heyman Law Firm at (410) 305-9287, or contact us online.