A Michigan appellate court determined that an agreement to arbitrate only needs to demonstrate a clear indication that the parties to the agreement intended to submit the dispute to arbitration. The word "arbitrate" itself is unnecessary.

In Kohler Oil Co. v. B & D Party Store Inc., No. 273243, 2007 WL 4548416 (Mich. Ct. App. Dec. 27, 2007), Kohler sold B & D gasoline on open account pursuant to a written agreement. Thereafter, Kohler sought damages against B & D on the open account and for early termination of the agreement.

The parties entered into a settlement agreement that provided that the issues were to be resolved by having a certified public accountant (CPA) review the records and issue a report determining whether monies were in fact owed on the account.

The CPA determined that Kohler was owed nearly $90,000. The lower court entered a judgment in favor of Kohler. The lower court also held that B & D could not seek vacatur or object to the CPA's determination in the manner that a party could challenge an arbitration award because the issue had not been resolved by arbitration.

The Court disagreed with the lower court's determination, reversing and remanding the decision. Arbitration is a mode of settling differences through investigation and determination by an unofficial person selected for the purpose, in lieu of a judicial proceeding. In Michigan, there are two forms of arbitration, statutory and common law.

No particular language is needed to create an agreement to arbitrate. It is not even necessary to use the word "arbitrate" or "arbitration." The Court noted that all that is required is a clear indication that the parties intended to submit the dispute to arbitration and to be bound by the decision.

In this case, the parties had a written agreement providing that the issue was not to be resolved by the court. Instead, it was to be resolved by an independent third party, the CPA. The parties also agreed that a judgment could be entered in accordance with the third party's determination.

The Court determined that such an agreement constituted an agreement to arbitrate. Therefore, the trial court erred to the extent that it ruled that B & D could not object to the award because the issue was not resolved by arbitration.