What Are The Essential Requirements Of Arbitration Agreement ?

The definition of Arbitration Agreement as contained in Section 2(b) of Arbitration and Conciliation Act, is a reference to Section 7. Thus Section 2(b) doesn’t define Arbitration Agreement but refers the readers to look into Section 7. Clause 1 of Section 7 contains an exhaustive definition of Arbitration Agreement. The clause lays down that an Arbitration Agreement is an agreement by two or more parties to submit to Arbitration all or certain disputes which have arisen (present dispute) or which may arise (future dispute) in respect of a defined legal relationship whether contractual or not. From this definition essential requirements of an Arbitration Agreement may be cleaned out.

What Are The Essential Requirements Of Arbitration Agreement ?

1) Agreement

2) Two or more parties.

3) Reference

4) Desire to submit to Arbitration.

5) All the disputes or some of the disputes arising or which may arise from a “defined legal relationship”.

6) The legal relationship may or may not be contractual. Legal Relationship means those which have been recognized by law or which are being recognized law. In other words new categories of legal relationship can’t be submitted to arbitration. Further it is necessary that the relationship out of which the dispute has arisen or may arise must be a legal one. That is can’t be moral, spiritual, social or familial.

7) The Arbitration Agreement may be in two forms – either it may be in the form of a separate and independent agreement or it may be in the form of a clause called arbitration clause in a contract. [Clause 2 of Section 7].

8) The Clause 3 of Section 7 has clearly laid down that an Arbitration Agreement must necessarily and compulsorily be in writing. This distinguishes an Arbitration Agreement from an agreement under the Indian Contract Act 1872. For a contract under Indian Contract Act may be oral or written both are valid. But an agreement under Arbitration and Conciliation Act must be in writing. In other words an oral Arbitration Agreement is not valid.

9) An Arbitration Agreement is deemed to be in writing in three situations –

a) where there is a document signed by the parties.

b) where there is exchange of letters, telex, telegrams, any other mode of telecommunication.

c) where there is a exchange of statements of claim or statement of defence – the existence of Arbitration Agreement is alleged in the claim and the existence is not defined in a defence. [Clause 4 of Section 7].

10 Essential Ingredients Of Arbitration Agreement

10) Clause 5 of Section 7 says that an Arbitration Agreement may also be in the form of a reference to an agreement or document containing an Arbitration Clause. However two things are essential –

a) the document which has been referred to must be in writing.

b) the Arbitration clause must form a part of the document or agreement.

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