Generally, an agreement comes into existence when a valid and unequivocal offer is accepted. The arbitration agreement is a bilateral contract in which both parties make legally binding promises to each other.
To amount to a valid offer, the communication, has to be ‘an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed’.
Acceptance on the other hand is defined as ‘a final and unqualified expression of assent to the terms of the offer’. Applying these objective definitions to the conclusion of the arbitration agreement, one party (offeror) makes an offer to arbitrate disputes arising from the underlying transaction to the other party (offeree) which the offeree accepts.
Exact time when the offer is accepted
This description of how the arbitration agreement is concluded is quite straightforward. The difficulty lies in identifying the exact time when the offer is accepted and by which of the parties to the agreement. This will depend on whether the agreement is a clause in a main contract or a stand-alone submission agreement.
In the case of a clause, it can be argued that the offer is made at the same time as the offer in the underlying contract, since the arbitration agreement is a clause or more appropriately a term of the main contract. If this analysis is correct then the offeror is the same party in both the main contract and the arbitration agreement.
In a submission agreement the offer is made after the dispute arises by the party who unequivocally communicates its intention to arbitrate the resulting dispute to the other contracting party. The initiating party is the offeror while the party to whom the offer was made becomes the offeree. The offeree is at liberty to accept or reject the offer to arbitrate the dispute. If the offeree accepts the offer, then the arbitration agreement is concluded. It is only after this offer has been accepted and an agreement concluded that the parties can commence the arbitral reference.
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