When negotiating a contract, parties often want to set out terms for how to settle disputes in the most cost-effective and efficient way. In many cases, this involves the use of arbitration clauses.

Arbitration is a legally binding process that resolves contract disputes without having to take the disagreement to court. If an arbitration clause is valid and enforceable, the issue is resolved by an independent panel. This panel still must abide by legal principles, or else a court may vacate their ultimate decision.

To learn more about how arbitration may apply in your contract dispute, we urge you to reach out to the experienced Maryland contract attorneys at Heyman Law Firm to get your free initial case evaluation by calling (410) 305-9287.

What is an Arbitration Clause?

An arbitration clause is a section of a contract that provides the means for alternative dispute resolution. The language of an arbitration clause dictates how issues between the parties of the contract should be resolved. Generally, arbitration clauses are used to avoid a dispute reaching the point where a formal court case is required. This can help save both sides money and provide predictability in a contractual agreement, which may be useful in many cases.

Typically, arbitration clauses are stipulations that the parties to a contract should resolve certain disputes outside of a courtroom. Instead of going in front of a state or federal court, these matters will be worked out in front of a panel of independent arbitrators.

How Does Arbitration Start in Maryland?

If a contract contains an arbitration clause, the language of the clause will typically set out the process for beginning arbitration. However, there are some instances where one party believes that the dispute in question is not governed by the arbitration clause, and instead move straight to filing a claim in court.

If the other party feels that the arbitration clause should apply, they will submit an application to stay or compel arbitration in the court where the other party filed their lawsuit. The court then must decide whether the arbitration clause applies, or whether the lawsuit may continue as filed.

Determining Whether an Arbitration Clause is Valid in Maryland

If parties to a contract are already disputing the terms of a contract, it is certainly possible that they may be disputing the applicability of an arbitration clause in that same contract. Fortunately, Maryland has passed legislation that clearly explains how and when arbitration clauses should be enforced.

Under the Maryland Uniform Arbitration Act (MUAA), written arbitration agreements generally cannot be revoked unless they are found to be either invalid or unenforceable. Below are the types of situations that may give rise to a court finding that an arbitration clause should be voided.

Lack of Consideration

A key element of any contract is consideration, or the exchange of services, goods, or other promises of value in exchange for payment. If either side of the deal does not provide consideration as part of their agreement, then the contract may not be valid as a whole.

Unconscionability

Unconscionability is what courts use to refer to any part or outcome of a contractual agreement that is so plainly unfair to one side or another that the contract should be altered or revoked. Finding unconscionability in a contract is not particularly common, as the law aims to promote free will in making transactions to the parties. A finding of unconscionability usually requires that one of the parties lacked sufficient bargaining power when negotiating or agreeing to the contract.

Fraud

If one of the parties to the contract deliberately misrepresented material facts in order to deceive the other party into signing the contract with the arbitration clause, the court may revoke the arbitration clause’s applicability. However, fraud relating to other clauses may not be enough to revoke the specific arbitration clause.

Duress

Terms of a contract, including arbitration clauses, may not be enforced if one party was made to reasonably feel that they did not have any choice in the matter. While we commonly relate duress to threats of physical violence, this is not a required element for a court to find that one party agreed to the contract’s terms under duress.

Can You Appeal an Arbitration Decision in Maryland?

Though arbitration is meant to be a path that avoids having to go through the justice system, there is an option to seek the relief of the court if the arbitration decision is flawed as a matter of law. The MUAA allows a state court to enter an order vacating an arbitration decision where the arbitrators “exceeded their powers.”

Maryland courts have interpreted this phrase to mean what is known as a “manifest disregard of the law” standard. A manifest disregard of the law requires more than an error in the law or failure on the part of the arbitrator to understand and apply the law. What is necessary to prove a manifest disregard of the law is a showing that the arbitrator understood and correctly stated the law, but purposefully chose to disregard it.”

The fact that arbitrators are not required to explain their decisions can make it difficult for a court to vacate an arbitration decision. Without an explanation or written decision, it can be impossible to determine the full basis for an arbitrator’s decision. Parties should always raise these issues during arbitration so that they are known and seek clarification on an arbitration decision before appealing in court.

For these reasons, it is important to have legal representation by your side during the arbitration process. Even though it is not an actual court case, you are both permitted and encouraged to enlist the help of a seasoned Towson, MD contract attorney to assist you through the process.

Heyman Law Firm Can Help You with Your Contract Dispute Arbitration in Maryland

To get seasoned advice from a dedicated Baltimore contract attorney today, call Heyman Law Firm right now at (410) 305-9287to get a complimentary initial case evaluation.