Discuss the advantages and disadvantages of the “Arbitration Procedure” in Light of Law of Contract and Other Laws


Parties are usually free for determine their person procedure for giving appointment to arbitrator, which also include the procedure for the selecting the chairman or an umpire. If the parties did not accept for specifying the mode for the arbitrators, then legal system will give the no selection process. Arbitrator is a type of panel which helps to close the dispute by arbitration. It may consist of two or more than two person by including the umpire or chairman. Parties from the dispute are generally free for agree the composition and number of the tribunal. Various legal systems can be different for the number of arbitrators for making the tribunal if there are no agreements. People generally did not understand the Arbitrator Definition properly and work of it. In the arbitral tribunal ad hoc type of arbitration the proceedings are that in which parties appointed the arbitrators without any type of supervising institution, instead on the courts and procedural law of different place of the arbitration for resolving the differences from the, replacement, appointment or from any authority of the arbitrators. In Arbitration of institutional proceedings, professional bodies of supervision appointed the arbitrators for giving the arbitration services, like the LCIA, ICDR and ICC. Although such type of institutions generally has the headquarters in the same city also, they can maintain the arbitral tribunal appointments nearly any country, by avoiding the all kind of need for different parties for involving the local city courts and procedures for the event on disagreement of the, replacement, appointment or to any parties.[1]


Arbitration is a means to settle a disagreement by turning it over to an impartial agent, the arbitrator. In order to properly carry out arbitration, an arbitrator is chosen by the two parties involved in the dispute. The key purpose of arbitration is to resolve the dispute by determining an equitable settlement. Traditionally, arbitration is carried out as a binding procedure. That is every arbitration decision is final and arbitration does not give way to further appeals. In practice, however, arbitration is usually performed by each side selecting one arbitrator, which in turn selects the third one. The dispute of arbitration is then presented to the three arbitrators chosen, with a majority of the arbitrators rendering a final decision. In financial disputes arbitration is often favored as a prudent alternative to litigation, which is typically a lengthier, less predictable, and a more resource-consuming process.[2] Depending on the circumstances, taking a dispute to arbitration may be mandatory or voluntary, and the arbitrator’s decision could be either binding or non-binding.

Arbitrators do not have to follow established legal precedents in reaching their decisions and are not required to explain the reasons behind their decisions, although they are expected to follow a code of ethics approved in 1977 by the American Arbitration Association and the American Bar Association. Still, in a binding arbitration both parties agree in advance to adhere to the arbitrator’s ruling and an arbitrator’s ruling carries the same legal weight as a decision made by a court of law. An arbitrator may be a single person or a panel.

Arbitration differs from mediation in that an arbitrator reaches an independent conclusion, whereas a mediator attempts to facilitate a negotiated settlement between the parties.


  • Cost and Time. An arbitration process generally moves faster than a lawsuit could maneuver through a court system, and is less formal, requiring less time from attorneys.
  • Expertise. The parties to a highly complicated or technical dispute can shop for an arbitrator who has extensive knowledge in the field involved. Arbitrators can come from any field: They are not required to have a law degree.
  • Privacy. Arbitration proceedings can be held in private, and decisions can be kept confidential.
  • International recognition. Arbitration results can be easier to enforce internationally than a court’s decision, thanks to the United Nations-sponsored 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
  • Firm Resolution. It is much more difficult to appeal an arbitration ruling than a court decision, although the U.S. Supreme Court has recently opened the door to arbitral appeals a bit wider.

Disadvantages :

  • Short-circuiting legal options: Controversies have arisen over mandatory arbitration provisions in credit card and employment contracts that prevent consumers and employees from taking their cases to court.
  • Costs. While arbitration proceedings are potentially less expensive than normal legal proceedings, the expense of hiring an arbitrator can weigh on parties who are involved in small monetary disputes or have a limited ability to pay.
  • Lack of appeals. It is difficult to overturn a bad decision, even if the arbitrator’s reasoning was demonstrably faulty.
  • Potential unfairness. Arbitrators can lack the appearance of fairness if they depend for a large share of their business on companies who frequently hire them to hear cases.

Binding vs. Non- Binding Arbitration:

In a binding arbitration, all parties agree to abide by the arbitrator’s decision before the process begins. Once rendered, the arbitrator’s decision carries the same legal weight as the ruling of a court.

In a non-binding arbitration, the parties agree that they will not be obligated to abide by the arbitrator’s ruling. After hearing all sides, the arbitrator renders a decision that carries the force of an opinion. The decision may or may not include a suggested damage award.

Non-binding arbitrations are commonly used by disputing parties to get a sense for the strength of their case. After the arbitration process ends, the parties are free to engage in litigation, to enter into binding arbitration or to engage in mediation to resolve their issues.


Mandatory vs. Voluntary Arbitration :

Mandatory arbitration means that all parties to a dispute are required, either by law or by contract, to use binding arbitration rather than litigation to settle their issue.

Mandatory arbitration clauses set out in contracts with a company[4] often give the company the right to choose the arbitrator and to set the rules for the arbitration process.

Some states require arbitration for certain types of disputes, most typically auto insurance disputes. In those cases, the arbitration process is typically laid out in state law and arbitrators are chosen from government approved pools.

In a voluntary arbitration, the parties agree to submit to arbitration rather than take a case to court. The parties are free to negotiate the choice of an arbitrator and the terms for the process, but in a binding arbitration all sides are obligated to abide by the arbitrator’s decision.

Law of contract:

 A contract is an agreement between two parties which is enforceable by law. An agreement is made when a person signifies his willingness to do or to abstain from doing anything with a view of obtaining the assent of the other party. Such act or abstinence is said to make a proposal. The person making the proposal is called the promisor and the person accepting the proposal is called the promise. Every promise and every set of promise forming consideration for each other is known as agreement. Promises which form the consideration or part of the consideration for each other are called reciprocal promises. An agreement not enforceable by law is called void agreement. An agreement enforceable by law at the option of one party and not at the option of the other party results into a voidable contract. Hence to make an agreement into a contract, the following has to happen.

– Agreement between the parties.

– Creation of responsibilities between the parties.

– Enforceability by law.


 Termination of contract:

 The decision to terminate a contract may be due to frustration, where it isn’t possible for the

Contractor to complete the work of the Contract due to circumstances that are beyond their control and out of their realm of responsibility. More often it is due to poor or non-performance, in which case it may be appropriate for the Termination to be followed by Suspension/Debarment. The reasons for Suspension/debarment can be found in Clause B7.2 of the Materials Management Policy and are as follows:

Causes of debarment include:

Conviction for a criminal offence of a person or a director or officer of such person

relating to obtaining or attempting to obtain by the person of a contract or subcontract,

or indicating a lack of business integrity or honesty which directly and seriously affects

the responsibility of the person, or arising out of the submission of bids, proposals or

other like procedures; or serious breach of contract indicating an unwillingness or inability to perform a contract in accordance with the terms and conditions or in accordance with the specifications, or a record of unsatisfactory performance of one or more contracts in accordance with the terms and conditions thereof, or in accordance with its specifications; or the breach of any ethical standard set out in Section B6.  The cause of debarment may, but need not, relate to a solicitation, award or performance of a City contract.


The Contract Administrator has the authority to issue a verbal warning to a Contractor who is

In default or whose performance does not conform to the terms of the Contract. This warning

Must give specific details, stating:

? the nature of the default or deficiency;

? dates and times that the deficiency was observed;

? the clause in the GCs, Supplemental Conditions or Specifications that is not being met;

? the expected resolution; and

? a timeline for resolution.

The verbal warning can be done by phone or in the form of a formal meeting, but there should

Always is a written note to file.

The Contract Administrator has the authority to issue a written warning to a Contractor who is

In default or whose performance does not conform to the terms of the Contract. This will often

Be the second step, after a verbal warning has been issued. This warning must give specific

Details, stating:

? the specifics of any previous warning, verbal or written

? The nature of the default or deficiency or recurrence of same;

? dates and times that the deficiency was observed or the recurrence was observed;

? the clause in the GCs, Supplemental Conditions or Specifications that is not being met;

? the expected resolution;

? A timeline for resolution; and

? Close the letter by stating the City’s action plan if the Contractor does not fulfil their

Contractual obligations, which could be termination of the contract or may include Suspension/debarment.


 Breach of Contract & Remedies:

 Breach of contract

A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his obligations under the contract. This can take various forms for example, the failure to supply goods or perform a service as agreed.Breach of contract may be either actual or anticipatory.

 Actual breach occurs where one party refuses to form his side of the bargain on the due date or performs incompletely. For example: Poussard v Spiers and Bettini v Gye. Anticipatory breach occurs where one party announces, in advance of the due date for performance, that he intends not to perform his side of the bargain. The innocent party may sue for damages immediately the breach is announced. Hochster v De La Tour is an example.

Effects of breach

A breach of contract, no matter what form it may take, always entitles the innocent party to maintain an action for damages, but the rule established by a long line of authorities is that the right of a party to treat a contract as discharged arises only in three situations.

Contract is:


Renunciation occurs where a party refuses to perform his obligations under the Contract. It may be either express or implied. Hochster v De La Tour is a case law example of express renunciation. Renunciation is implied where the reasonable inference from the defendant’s conduct is that he no longer intends to perform his side of the contract. For

Example: Omnium D’Enterprises v Sutherland.

 Breach of condition:

The second repudiatory breach occurs where the party in default has committed a breach of condition. Thus, for example, in Poussard v Spiers the employer had a right to terminate the soprano’s employment when she failed to arrive for performances.

  Fundamental breach:

The third repudiator breach is where the party in breach has committed a serious (or fundamental) breach of an in nominate term or totally fails to perform the contract. A repudiator breach does not automatically bring the contract to an end. The innocent party has two options: He may treat the contract as discharged and bring an action for damages for breach of contract immediately. This is what occurred in, for example, Huckster v De La Tour. He may elect to treat the contract as still valid, complete his side of the bargain and then sue for payment by the other side. For example, White and Carter Ltd v McGregor.


Damages are the basic remedy available for a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party. The object of damages is usually to put the injured party into the same financial position he would have been in had the contract been properly performed. Sometimes damages are not an adequate remedy and this is where the equitable remedies (such as specific performance and injunction) may be awarded.


So after the long discussion we can say that arbitration is a very common used  from the primitive age. Arbitration is an alternative system of “private justice” provided for by law, different from the procedure followed in the normal courts, designed to resolve disputes between individuals so that they can end their differences peacefully through an “award” issued by the arbitrator appointed which is binding and equivalent to a judicial ruling, without having to resort to the courts of justice. Although much work remains to be done, the list may facilitate the use of general principles of law as the governing substantive law by providing a delineated set of such principles. If so, this may encourage parties to enter into international commercial agreements despite the substantial cultural and legal differences among their countries.


Works Cited:

Branson & Wallace, Choosing the Substantive Law to Apply in International Commercial Arbitration, 27 VA. J. INT’L L. 39, 46 (1986).

A. REDFERN & M. HUNTER, supra note 1, at 53-55.





R. Austen-Baker, ‘Gilmore and the Strange Case of the Failure of Contract to Die After All’ (2002) 18 Journal of Contract Law 1



McNair, The General Principles of Law Recognized by Civilized Nations, 33 BRIT. Y.B. INT’L L. 1 (1957).

[1] http://businessvocab.com/arbitration-definition/

[2] http://www.answers.com/topic/arbitrator



[3] http://know.about.com/Arbitration


R. Austen-Baker, ‘Gilmore and the Strange Case of the Failure of Contract to Die After All’ (2002) 18 Journal of Contract Law 1

[5] http://legal-dictionary.thefreedictionary.com/promise

[6] http://www.goldsmithibs.com/resources/free/Breach-of-Contract/notes/Breach-of-Contract-Remedies.pdf


[7] http://bizlawfirm.com/all-practice-areas/breach-of-contract/

[7] Glanville Williams. Learning the Law. Eleventh Edition Stevens. 1982. p. 9