Arbitration rules that force parties to resolve disagreements through mediation rather than litigation, are commonplace in a variety of agreements, particularly commercial contracts. 

But what happens when one company decides to sue another, regardless of the fact that their agreement has an arbitration clause? The defendant’s response to the suit typically determines whether or not the case will be successful. Here’s what you should know. 

Arbitration Clauses May Be Used as a Defense  

Consider a case where two organizations committed to arbitrate any contract-related problems by putting an arbitration provision in their contract. Despite entering into the contract, one company later feels aggrieved and initiates litigation. 

In rebuttal to the lawsuit, the defendant’s counsel would most likely mention the arbitration clause as a defense to the proceedings, or they may inform the court of the arbitration agreement’s presence and urge the judge to dismiss the case.

But what happens if the defendant’s lawyer fails to mention the promise to arbitrate in their response to the dispute? Has the defendant’s liberty to arbitrate been forfeited as a result? 

It’s possible. While just responding to a lawsuit does not always imply a surrender of the desire to arbitrate, it can help to create the impression of litigation involvement, which courts have held to be sufficient to relinquish arbitral rights.

How Case Law Has Impacted Business Disputes Involving Arbitration Clauses 

The Sixth Circuit Court of Appeals has devised a two-part test for determining whether an individual’s or company’s actions amount to a renunciation of a contractual obligation to arbitrate disagreements. This test was created with the awareness that “waiver of the right to arbitration is not to be lightly inferred” due to the obvious substantial presumption in support of arbitration. Glazer v. Lehman Bros., Inc., 394 F.3d 444, 450 (6th Cir. 2005).

When to Bring a Business Litigation Lawyer On Board 

Arbitration provisions can be included in a variety of contracts. If you are involved in a contract dispute, especially if your agreement has an arbitration clause, it’s important to seek out the counsel of an experienced Florida business litigation lawyer. 

At Feinstein Real Estate Litigation & Business Law, we have the skills and expertise to provide you with comprehensive legal representation. Call today to book your consultation at 954-767-9662 (Fort Lauderdale), 561-981-6212 (Boca Raton,) or 305-728-5267 (Miami). Our team is available now to help.