Jan 2

When Is an Agreement to Arbitrate Not an Agreement to Arbitrate?

Whether two parties actually agreed to arbitrate their dispute can be a difficult question to answer, particularly within the context of a complex construction project. Even experienced judges – reading the exact same contract language – do not always agree on the answer to this question. Therefore, it is always preferable to make sure the agreement itself removes any doubt as to the parties’ intent.

Recently, Goetz Fitzpatrick LLP represented two project owners who entered into separate contracts with the same general contractor for similar construction projects. Pursuant to each contract, the general contractor procured separate payment and performance bonds for each project. Each owner subsequently terminated the general contractor for poor performance and served an arbitration demand against it and its surety.

David Kuehn, Esq.

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[1] Each performance bond included the same provision incorporating the terms of the corresponding contract between the owner and the general contractor: “The Contractor and the Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the Owner for the performance of the Construction Contract, which is incorporated herein by reference.”

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