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CS Professional · Arbitration, Mediation and Conciliation · Arbitration: Introduction, Agreements and its Institutions

A written purchase contract between Narmada Agro Ltd and Pooja Foods does not contain an arbitration clause but states, 'This contract is subject to the General Terms of Trade Association X, which are incorporated herein.' Those General Terms contain an arbitration clause. Pooja Foods denies any arbitration agreement. Under Section 7, which view is correct?

An arbitration agreement arises. Section 7(5) provides that a reference in a written contract to a document containing an arbitration clause is an arbitration agreement if the reference makes that clause part of the contract, as the words 'incorporated herein' do.

  1. ANo arbitration agreement arises, because the clause is not in the contract itself
  2. BAn arbitration agreement arises if the reference is such as to make that arbitration clause part of the contract, the contract being in writingCorrect
  3. CAn arbitration agreement arises only if the Terms are separately signed by both parties
  4. DAn arbitration agreement arises automatically whenever any document is mentioned

Explanation

Section 7(5) says a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference makes that clause part of the contract. The words 'incorporated herein' show such intent. A mere mention of a document would not suffice, so the last option is wrong.

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