Chapter 5 - § 5.8 • SCOPE OF THE AGREEMENT TO ARBITRATE

• Jurisdiction: Colorado

§ 5.8 • SCOPE OF THE AGREEMENT TO ARBITRATE

See generally §§ 7.5.2 and 7.8.

Of particular importance is the scope of the arbitration agreement. Although arbitration is a consensual relationship between the parties, once the agreement is reached, the parties are contractually obligated to submit to arbitration those disputes within the scope of the agreement, i.e., the disputes defined by the agreement.

Issues as to scope of the arbitration clause particularly arise when the claim asserted is in tort, or is a statutory claim, as distinguished from a claim for a breach of the contract containing the clause. This usually becomes a question of interpretation of the clause. See § 5.7. For example, when the insured sought arbitration of its coverage dispute with the insurer under the arbitration clause in the policy, but separately commenced a civil action against the insurer for bad faith, the court held the bad faith claim was within the scope of the arbitration clause.¹¹⁰

However, the scope may expressly or impliedly be amended by the parties. For example, if issues are submitted to the arbitrator without objection, the arbitration agreement is impliedly amended to include those issues within the scope.¹¹¹

Johnson v. Blue Haven Pools of Louisiana¹¹² provided a rather unique interpretation of the scope of an arbitration clause. The plaintiff entered into a contract with the defendant for construction of a swimming pool. The contract called for a 10 percent down payment, provided that the "Agreement is subject to arbitration under the Commercial Arbitration Rules" of the AAA, and provided for cancellation if done within three days after execution of the contract. The plaintiff cancelled the contract and sued to recover her deposit. The court denied a motion to stay litigation pending arbitration, saying that the contract did not state that the arbitration clause applied to the validity (cancellation) of the contract and, instead, referred to disputes involving the contract, such as construction, payment, etc. The court also noted that if the contract "was timely cancelled, revoked or terminated, then there is no contract and thus, no mediation clause."¹¹³ The court relied upon its Uniform Arbitration Act, which provided that "[i]f the making of the arbitration agreement . . . is in issue, the court shall proceed summarily to the trial thereof."¹¹⁴

Arbitration clauses frequently provide that they are applied to "claims arising out of or relating to" the...