Waiver of Contractual Arbitration
Many contracts contain clauses stating that if a dispute arises about the contract then the controversy may only be resolved through arbitration. An arbitration is where a third-party makes a final, binding decision about a case. One of the benefits of arbitration is that it is often less expensive than litigation. It further avoids the cost and uncertainty of a potential jury trial in a breach of contract suit.
Despite going to careful lengths to include an arbitration clause in a contract, a party may waive arbitration inadvertently. In Missouri, the right to arbitration may waived be if three elements are present: the party had (1) knowledge of the existing right to arbitration and (2) acted inconsistent with that right in such a way (3) that it prejudiced the other party. Berhorst v. J.L. Mason of Mo., Inc., 753 S.W.2d 659 662 (Mo. Ct. App. 1988). Prejudice is determined on a case-by-case basis. Prejudice may result from lost evidence, duplication of efforts, use of discovery methods unavailable in arbitration, or the litigation of substantial issues going to the merits of a given case. Nettleton v. Edward D. Jones & Co., 904 S.W.2d 409, 411 (Mo. Ct. App. 1995). Generally, waiver of arbitration is not a favored finding, and there is a presumption against it.
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