Arbitration Agreement Specific Performance

February 13, 2023

Arbitration Agreement Specific Performance: What You Need to Know

In today’s business world, it’s common for companies to include arbitration agreements in their contracts. These agreements allow disputes to be resolved outside of court, often in a more efficient and cost-effective manner.

But what happens when one party to the agreement fails to comply with the arbitrator’s decision? This is where the concept of “specific performance” comes in.

Specific performance is a legal remedy that requires a party to perform a specific action, as ordered by a court or arbitrator. In the context of an arbitration agreement, this could mean complying with a decision or award.

For example, let’s say two companies enter into an agreement with an arbitration clause. One company breaches the agreement by failing to deliver goods as promised. The second company initiates arbitration and the arbitrator awards damages to the second company.

If the first company still refuses to pay the damages, the second company can seek specific performance from a court. This would require the first company to pay the damages as ordered by the arbitrator.

Of course, seeking specific performance can be a costly and time-consuming process. It’s often better to try and resolve disputes without resorting to legal action. This is why many companies include mediation or other alternative dispute resolution methods in their contracts.

However, if all else fails, specific performance can be an effective tool for enforcing arbitration agreements and ensuring compliance with decisions and awards.

It’s important to note that specific performance is not always available or appropriate. For example, if the action that needs to be performed is impossible or impractical, specific performance may not be ordered.

In addition, specific performance may not be available for certain types of disputes, such as those involving personal injury or defamation.

Overall, arbitration agreements can provide many benefits for businesses, including efficiency and cost-effectiveness. But it’s important to understand the potential limitations and remedies available if one party fails to comply with a decision or award. If you’re considering including an arbitration agreement in your contracts, consult with a legal professional to ensure that it’s appropriate for your specific situation.

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