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

Mehta Textiles and Rao Traders signed a supply contract containing an arbitration clause. Before any dispute arose, Mr. Rao, the sole proprietor of Rao Traders, died. His son, who is his legal representative, continues the business. A dispute then arises over unpaid invoices. Mehta Textiles asks whether the clause is still usable. What is the position?

The arbitration agreement survives Mr. Rao's death. Section 40(1) says an arbitration agreement is not discharged by the death of a party, and it is enforceable by or against the legal representative, so Mehta Textiles can invoke the clause against the son without any fresh agreement.

  1. AThe arbitration agreement is discharged as regards Rao, so Mehta Textiles must go to court
  2. BThe arbitration agreement continues and is enforceable by or against the legal representative of Mr. RaoCorrect
  3. CThe arbitration agreement continues only if the son signs a fresh agreement in writing
  4. DThe arbitration agreement is suspended until a court appoints a new arbitrator

Explanation

Under section 40(1), an arbitration agreement is not discharged by the death of any party, either for the deceased or for the other party. It is enforceable by or against the legal representative. A fresh agreement is not required, so the option demanding one is wrong.

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