April 08, 2017



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Company Owner Asks How to Tackle Breach of Contract

Question: I have a small company that delivers goods to clients. I signed a contract with another company but they breached the terms of the contract. When I filed a case in court the other company objected, as there is an arbitration clause in the contract and so they requested that the court does not rule on the matter and that it is instead ruled upon by an arbitration court. The court then told me that, due to the clause, I must file my case at an arbitration institute instead. I am afraid of making mistakes. What should I do?

Answer: In accordance with Article 203 of Civil Procedures Law No. 11 of 1992 and its amendments, if you signed a contract with an arbitration clause and then try to file a case at a regular court, the other party has every right to object in the first hearing. If such an objection has been submitted in the first hearing, the court is duty-bound to dismiss the case due to it not being in its jurisdiction. However, if such a challenge is raised after the first hearing, the case must continue as the other party was too late in lodging their objection. So, firstly, check when the objection was filed. If the company attended and did not object, you have the right to appeal the court's decision within 30 days. If the objection was submitted at the right time, then you must file the case in the arbitration court if you wish to proceed. However, it is common practice for most arbitration clauses to contain notice periods, so one party is obliged to send notice to the other to allow them time to comply with the requirement or to settle the dispute before filing the arbitration case. Check your contract for any such notice and, if present, it is advised that you should follow the procedure to try to find a solution before going to the arbitration court.

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