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Arbitration Agreement under the Indian Contract Act: An Overview

Arbitration is a widely used method of resolving disputes between two parties without going to court. An arbitration agreement is a contract between the parties that provides for the use of arbitration to resolve any disputes that may arise between them. In India, the Arbitration and Conciliation Act, 1996 governs arbitration proceedings. However, the Indian Contract Act, 1872 also contains provisions related to arbitration agreements.

What is an arbitration agreement?

An arbitration agreement is a contract between the parties, where they agree to resolve disputes that may arise between them through arbitration instead of going to court. The agreement must be in writing, and it can be either a standalone agreement or a clause in a larger contract.

Section 7 of the Indian Contract Act, 1872 defines an arbitration agreement as follows:

“A written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not, shall be enforceable, notwithstanding any provision in any other law for the time being in force.”

This means that any arbitration agreement that is in writing, whether or not an arbitrator is named in it, will be enforceable under the Indian Contract Act, 1872.

Enforceability of Arbitration Agreements

The enforceability of an arbitration agreement depends on various factors such as the validity of the agreement, the jurisdiction of the court, and the nature of the dispute. Section 16 of the Arbitration and Conciliation Act, 1996 provides that an arbitration agreement that is in writing and is valid shall be treated as an agreement independent of the other terms of the contract. Furthermore, any party to the agreement can approach the court to enforce the agreement.

However, there are certain circumstances in which an arbitration agreement may not be enforceable. For example, if the agreement is not in writing or if it is illegal or void, the agreement will not be enforceable under the Indian Contract Act, 1872.

Conclusion

In conclusion, an arbitration agreement is a contract between the parties that provides for the use of arbitration to resolve any disputes that may arise between them. It must be in writing and can be either a standalone agreement or a clause in a larger contract. The Indian Contract Act, 1872 contains provisions related to arbitration agreements, and the enforceability of such agreements depends on various factors. In order to avoid any ambiguity or confusion, it is advisable to seek professional legal advice before entering into an arbitration agreement.