Legal Updates

A party who does not raise at the first chance a contention that an arbitration clause exists agrees to its cancellation

August 5, 2020

Two parties signed a contract which included an arbitration clause. When a dispute arose, one of the partied filed a lawsuit in Court. The other did not object and the proceeding was tried. However, when a new dispute arose, it was contended that this should be hear in Court due to the arbitration clause.
The Court held that the arbitration clause is no longer in effect. A party who did not, at the first chance, raise the contention of the existence of an arbitration clause, and put up a defense in court, is deemed as one who abandoned the arbitration clause and may no longer contend, even as part of a different dispute, that the parties are bound by arbitration. There is an active duty to raise the contention at the first chance and the reasons due to which the contention was not made on time are irrelevant. Once the contention is abandoned it does not exist anymore, and one may not later, even in an unrelated dispute, rechoose the path of arbitration.