Arbitration remains a prominent method for dispute resolution outside of the formal judicial system. As a substitute to litigation, the arbitration process is intended to provide a final disposition in a more expeditious, inexpensive, and less formal manner for the involved parties. Nonetheless, disputes frequently arise regarding the enforceability of arbitration clauses that render some agreements subject to judicial scrutiny. This article examines recent developments concerning the enforceability of arbitration provisions in commercial agreements and highlights emerging issues for practitioners to be aware of when reviewing such clauses and litigating arbitration disputes. In light of several recent decisions in New Jersey on these issues, this article focuses on arbitration issues under New Jersey law.

Arbitration of Disputes in Context

Arbitration provisions are commonplace in commercial contracts, permitting consenting parties to resort to the private resolution of disputes and thereby waive the right to litigate in a court of law. Both the Federal Arbitration Act (FAA), 9 U.S.C. Sections 1–16, and the New Jersey Arbitration Act (NJAA), N.J.S.A. 2A:23B-1-36 express a general policy in favor of arbitration "as a means of settling disputes that otherwise would be litigated in a court." See Badiali v. New Jersey Manufacturers Insurance Group, 220 N.J. 544, 556 (2015). Under the NJAA, an agreement "to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract." The standard for enforcement of an arbitration provision differs based on the existence of a consumer, employment, or commercial agreement.