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What is an Arbitration Agreement?

Arbitration agreement is nothing but a contract. It comes into existence only if both the parties to the contract agrees to the terms and conditions of said contract. Section 2 (1) (b) and Section 7 of the Arbitration & Conciliation Act, 1996 deals with the concept of Arbitration Agreement.

It defines the term Arbitration Agreement.This means an agreement by the parties to submit all or any of the disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual OR not, to Arbitration.

Arbitration Agreement is a collateral term of contract as distinguished from its substantive terms; but none the less, an integral part of it. It may be either in the form of a separate agreement or of an arbitration clause in an agreement.

However, comprehensive the terms of an Arbitration Clause, the existence of an agreement is essentially necessary for its operation. In other words an Arbitration Agreement shall be in writing and an Agreement shall be deemed to be in writing, if;
  • The Arbitration Agreement is contained in a document and the parties signed the same.
  • The Arbitration Agreement is contained in an exchange of letters, telex, telegrams or by other means of communication which provide a record of the agreement.
  • The Arbitration Agreement is contained in an exchange of statement of claim and defense in which the existence of agreement is alleged by one party and not denied by the other party.

Essential ingredients of an Arbitration Agreement are;

  • There should be a valid and binding agreements between the parties.
  • Such agreement may be contained as a clause in an agreement or as a separate agreement.
  • Such an agreement shall be deemed to be in writing.
  • Party’s intention to refer present and future disputes to arbitration.
  • Dispute to be referred to an arbitrator is in respect of a defined legal relationship, whether contractual or not.


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