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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

A contract between Dorin Co and Salk Co contains a clause requiring all disputes to go to arbitration. A dispute arises and Dorin Co issues court proceedings for breach of contract. Salk Co asks the court to stop the case. What is the most likely outcome?

The court will usually stay the proceedings and send the parties to arbitration. A valid arbitration clause is a freely agreed term, and courts generally enforce it, keeping only a supervisory role. Dorin Co cannot simply ignore the clause and choose litigation.

  1. AThe court will usually stay the proceedings and refer the parties to arbitrationCorrect
  2. BThe court will hear the case because arbitration clauses cannot oust court jurisdiction
  3. CThe court will decide whether Dorin Co may choose between court and arbitration

Explanation

Courts generally uphold a valid arbitration agreement and stay court proceedings so the dispute goes to arbitration. Parties freely agreed to this method. Option two is wrong because a valid arbitration clause is generally given effect, though courts keep a supervisory role over arbitration.

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