SW Legal studies in Business

Contract Clause Mandating Arbitration of Disputes Must Be Clear and Unambiguous
Description Appeals court affirmed the right of a party to a contract in dispute to litigate rather than arbitrate. The contract stated that when mediation failed parties could either litigate or arbitrate. Hence, the right to litigate had not been eliminated in the contract.
Topic Contracts
Key Words Breach; Arbitration; Mediation
C A S E   S U M M A R Y
Facts Mirra had contracted to do construction work at a high school for a school district. When Mirra won the bid for the contract, the standard terms stated in the event of disputes the parties would go to arbitration. When the parties worked out the specifics of their contract, a new clause stated that disputes "shall be submitted to mediation before any lawsuit or Demand for Arbitration is filed." Eventually, the parties got into a dispute. The mediation was not successful. The school sued; Mirra asked the court to force arbitration. The district court held that the litigation could proceed since "the contract is unambiguous and does not require arbitration." Mirra appealed.
Decision Affirmed. "The interpretation of unambiguous contract language is a matter of law reserved to the courts. ... Arbitration is a contractual matter, and no party may be forced to arbitrate a dispute unless she has expressly agreed to do so by contract. ... Here, there is no language in the final version of the contract that clearly suggests an intent to arbitrate." The final version stated that either party could file suit or request arbitration. The change in the contract, from its standard terms to the version finally agreed upon, does not require arbitration. There must be clear contractual language to mandate arbitration. Such language did not exist in the contract agreed to by the parties.
Citation Mirra Company, Inc. v. School Administrative District #35, 251 F.3d 301 (1st Cir., 2001)

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