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Contract disputes and compulsory arbitration, P.1

Contract disputes are quite common in every industry, since because contracts are used in nearly every business transaction. When contract disputes arise, parties need to have an effective way of resolving the disagreement and compensating one another for losses. 

One potentially effective way to resolve contract disputes is through contractually-mandated arbitration. Compulsory arbitration is a feature of many business contracts. A recent example of engaging the arbitration process over a contract disputes involves two companies in the oil and gas telecommunications sector. 

The dispute involves RigNet, a Houston-based telecommunications companies serving the oil and gas industry, which entered into an agreement in January 2014 with Inmarsat, a company that owns and operates a global satellite network offering mobile and fixed communication services. The agreement was part of RigNet's purchase of most of Inmarsat's energy broadband business back in 2013.

Under the agreement, RigNet was to purchase up to $65 million of capacity on a high-throughput satellite constellation for five years. RigNet canceled the contract, though, prompting Inmarsat to take legal action. Inmarsat initiated a formal dispute last year, claiming that RigNet owes the full value of the five-year, $65 million. The arbitration process began last October.

At the center of the dispute is whether Inmarsat met its contractual obligations. Breach of contract, of course, is the central issue in most contract disputes. Careful reading and interpretation of contractual terms are necessary to get to the bottom of these disputes, of course, and working with an arbitrator who has experience in contract disputes can be really helpful.

In our next post, we'll look a bit more at the topic of contract disputes and compulsory arbitration. 

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