April 29, 2015

Be Cautious of Arbitration Clauses Before Signing Buy-Sell Agreements

By: Tom Oliveri

Recently my office was representing a shipper in a dispute where the shipper had signed a purchase agreement detailing the understanding of both parties prior to supplying product. The shipper requested that I file a PACA complaint against the buyer for a breach of contract of the agreement but embedded in the agreement was a requirement that all disputes under the agreement be submitted to mediation and ultimately arbitration. As anticipated, the PACA referred to precedent decisions that detailed if the parties have agreed upon an arbitration provision, it must be followed. The PACA was not able to get involved in the dispute because the parties had pre-agreed to the venue for dispute resolution. Therefore, the shipper had no choice but to secure legal counsel and enforce the contract’s arbitration provision against the buyer.

The reason for highlighting this situation is to make sure you thoroughly review all clauses in your agreements. There are pros and cons to including certain language into a written agreement. Make sure you have fully vetted those advantages or disadvantages and then make an appropriate business decision for your company.

Therefore, I strongly recommend that before you enter into any written supply or buy contract with a potential customer you have legal counsel review the contact for how and in what venue disputes are going to be handled.

If you have any questions regarding buy-sell agreements, please contact me directly at TommyO@wga.com or 949-885-2269.