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Agreements to Arbitrate are Waiveable In Pennsylvania

2/14/2013 | Construction Blog

Construction agreements often contain clauses requiring parties to submit their claims to arbitration. These provisions are favorable to the parties, as arbitration has certain benefits. For example, it may be quicker and more efficient than going through the court system and may be more relaxed than the legal process, thereby encouraging compromise or ongoing business relationships between the parties. An arbitrator or a panel of arbitrators is generally chosen by the parties, which typically results in the selection of someone sophisticated and knowledgeable in the construction industry.

Courts, too, favor arbitration agreements and routinely enforce agreements to arbitrate. Pennsylvania courts support arbitration as a matter of public policy. Yet, the right to arbitrate may be waived by a party’s own actions. Recently, in a case pending in Montgomery County, Pennsylvania captioned The Woods at Wayne Homeowners Association v. Gambone Brothers Development, the trial court held that one of the defendants waived its right to arbitrate. While it runs contrary to the court’s stated public policy, the court reasoned that the defendant had waived its right to arbitrate by waiting 43 months from the date the complaint was filed to raise the agreement to arbitrate in preliminary objections. The defendant had also failed to raise the agreement to arbitrate in response to a motion to compel discovery.

The decision in The Woods at Wayne Homeowners Association v. Gambone Brothers Development is not the only Pennsylvania decision holding that a party waived its right to arbitrate; nonetheless it is a notable reminder to actively preserve one’s contractual rights.

If your business has an agreement requiring the parties to arbitrate, it is imperative that the issue be raised promptly at the outset of any dispute and that no action is taken that may be construed as submitting to the jurisdiction of the court. Otherwise, the right to arbitrate may be waived.