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Making Sure You Get the Full Benefit of the Arbitration Clause in Your Florida Commercial Contract

Whether you are an employee signing a new employment agreement or you are a business entering into a new commercial contract, there are certain areas of your contract where it is particularly important to pay extra close attention to the “fine print.” One of these is the arbitration clause that may exist in your agreement. When it comes to negotiating – and later enforcing – these and other elements of your commercial contract, you’ll want to rely on representation from an experienced South Florida litigation attorney.

As an example of how a well-worded arbitration clause can work to protect your interests, look at this case from the Tampa area. A local aviation authority awarded a contract to a Texas construction firm for the building of a rental car facility. The contractor hired an Orlando firm to serve as one of its subcontractors. The agreement between those two entities stated, in part, that certain disputes “shall be resolved by arbitration pursuant to the Construction Industry Rules of the American Arbitration Association then prevailing.”

Eventually, there was a dispute. The subcontractor sued the contractor for breach of contract, alleging that the aviation authority paid the contractor, but that the contractor did not pay the subcontractor what it was owed. The contractor sought to compel arbitration, but the trial court ruled for the subcontractor.

The contractor, though, won on appeal. In ruling for the contractor, the appeals court said several things that are noteworthy for any business negotiating this type of contract. The court pointed out that the law requires that courts resolve these disputes by discerning the intent of the contracting parties, but that, in addition, “Florida public policy favors arbitration of disputes and thus ‘courts should resolve doubts concerning the scope of such agreements in favor of arbitration.’” This is somewhat like the old baseball adage about how a “tie goes to the runner,” with uncertainty favoring the party desiring arbitration.

The agreement contained two exceptions from arbitration, with the subcontractor relying heavily on the second one. That exception said that situations where the aviation authority was involved in the dispute were not required to be arbitrated. The subcontractor’s argument was that, even though it did not name the authority as a party in its lawsuit, the authority was “involved” as a third-party beneficiary to the subcontract.

That argument didn’t work in this case. The court decided that the authority was a third-party beneficiary to all contracts, subcontracts and purchase orders executed by the contractor. This created a problem because, if the court accepted the subcontractor’s argument, then that would make the “involved” exception “superfluous” and meaningless, and Florida law forbids courts from interpreting contracts in a way that would make a section superfluous. The subcontractor’s argument also asked the courts to interpret the term “involved” in a way that was contrary to the word’s plain meaning, which is another thing that contract law forbids courts from doing.

Whether you are battling over a contract breach, arbitration clause or some other aspect of a commercial contract, be sure you have the litigation representation you need. The experienced South Florida commercial litigation attorneys at Stok Kon + Braverman are here to help. Our attorneys have many years of experience handling a wide array of commercial litigation actions and are ready and equipped to help your business with yours.

Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.