How do parties enter into a legally binding arbitration agreement?

ELEMENTS OF ARBITRATION AGREEMENT

The elements of a valid arbitration agreement are: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Advantage Physical Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex. App.-Houston [14th Dist.] 2005, no pet.). 
   
The term "meeting of the minds" refers to the parties' mutual understanding and assent to the expression of their agreement. Principal Life Ins. Co. v. Revalen Dev., LLC, 358 S.W.3d 451, 454 (Tex. App.-Dallas 2012, pet. denied). Contracts require mutual assent to be enforceable. Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007) (per curiam). Evidence of mutual assent in written contracts generally consists of signatures of the parties and delivery with the intent to bind. Id. Whether the parties reached an agreement is a question of fact. Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.-Houston [14th Dist.] 2010, pet. denied).

 

Arbitration clauses generally do not require mutuality of obligation so long as adequate consideration supports the underlying contract. In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 233 (Tex. 2008) (orig. proceeding) (per curiam). When an arbitration agreement is part of a larger, underlying contract, the remainder of the contract may constitute sufficient consideration for the arbitration provision. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006) (orig. proceeding). 
   
Stand-alone arbitration agreements require binding promises from both sides as they are the only consideration rendered to create a contract. In re Advance PCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (orig. proceeding) (per curiam). 
  
A promise is illusory if it does not bind the promisor, as when the promisor retains the option to discontinue performance. In re 24R, Inc., 324 S.W.3d 564, 567 (2010) (orig. proceeding) (per curiam). When illusory promises are all that support a purported bilateral contract, there is no mutuality of obligation and, therefore, no contract. Id. An arbitration agreement is not illusory unless one party can avoid its promise to arbitrate by amending the provision or terminating it altogether. Id.

SOURCE: HOUSTON COURT OF APPEALS - 14-12-00263-CV – 2/2/2013 

ELEMENTS OF CONTRACT-FORMATION GENERALLY  

To create an enforceable contract, there must be (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. See Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.-Houston [14th Dist.] 2010, pet. denied). "Meeting of the minds" describes the mutual understanding and assent to the agreement regarding the subject matter and the essential terms of the contract. See Potcinske v. McDonald Property Investments, Ltd., 245 S.W.3d 526, 530 (Tex. App.-Houston [1st Dist.] 2007, no pet.) Mutual assent concerning material, essential terms is a prerequisite to formation of a binding contract. See id.