Chapter 5 - § 5.12 • DEFENSES TO THE VALIDITY OF ARBITRATION AGREEMENTS

• Jurisdiction: Colorado

§ 5.12 • DEFENSES TO THE VALIDITY OF ARBITRATION AGREEMENTS

See § 7.6 for discussion of defenses to arbitration.

Once the existence of an agreement to arbitrate is found, there may be defenses to the enforcement/validity of that agreement. FAA § 2 provides that an arbitration agreement may be unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." Under the CRUAA, C.R.S. § 13-22-206(1), the issues as to the validity of an agreement to arbitrate are similar.

When the CRUAA governs, Colorado legal defenses to enforcement/validity of contracts generally are applicable to an arbitration agreement. When the FAA is applicable, generally the case law holds that state law governs the formation of an arbitration agreement.¹³¹ However, that statement perhaps is not 100 percent accurate. Because FAA § 2 refers to "grounds that exist at law or in equity" without reference to state or federal law of grounds for the revocation of a contract, probably both will apply. Generally, state law of such grounds is followed, as there is little federal law on contract defenses.

However, as a somewhat technical point, when the FAA governs, the state law of contract defenses is only looked to for "guidance."¹³² "[I]n deciding whether there is an enforceable agreement to arbitrate, 'courts generally should apply ordinary state-law principles that govern the formation of contracts.' The court's application of state law principles must also give 'due regard . . . to the federal policy favoring arbitration.' . . . Grounds for invalidating an arbitration agreement would include 'generally applicable contract defenses such as fraud, duress, or unconscionability.'"¹³³

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Notes:

^[131] Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 475 (10th Cir. 2006); First Options of...