This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
It has been said that arbitration can not exist in the true sense of the term unless the entire dispute is submitted,1 and that a reference to appraisers or arbitrators for the purpose of determining a single fact, is not arbitration in the proper sense of the term.2 A reference of this sort for the purpose of determining the value of property,3 or the quantity of property,4 has accordingly been held not to be arbitration in the proper sense of the term.
1Bos v. Helsham, L. R. 2 Exch. 72; Omaha v. Omaha Water Co., 218 U. S. 180, 48 L. R. A. (N.S.) 1084, 54 L. ed. 991; Irwin v. Hoyt, 162 Ia. 679, 144 N. W. 584; Green & Coates St. Passenger Ry. v. Moore, 64 Pa. St. 79.
2 Chambers v. Goldthorpe , 1 Q. B. 624; Brown v. Wheeler, 17 Conn. 345, 44 Am. Dec. 550.
3 See Sec. 2530.
4 See Sec. 722.
1Billmyer v. Hamburg-Bremen Fire Ins. Co., 57 W. Va. 42, 49 S. E. 901.
If a single fact, such as a question of valuation, is to be settled, the method of settling it is called an appraisement. Sebree v. Board of Education, 254 111. 438, 98 N. E. 931; Bangor Savings Bank v. Niagara Fire Ins. Co., 85 Me. 68, 35 Am. St. Rep. 341, 20 L. R. A. 650, 26 Atl. 991.
See also, State v. Equitable Surety Co., 140 Minn. 48, 167 N. W. 292.
"But it is unnecessary to the decision of the question here raised to adopt in its full extent the doctrine apparently established by these authorities relating to the ordinary submission of an existing controversy to referees.
The question here does not arise in connection with a general submission to arbitration.
"1t was a proceeding for the ascertainment of a single fact, or the settlement of a particular question in the chain of evidence, and not originally designed to terminate the whole controversy. In the absence of definite knowledge as to the extent of the loss, and in anticipation of a possible disagreement, it was mutually agreed that the damage should be 'ascertained and estimated' by competent and disinterested appraisers selected with special reference to their knowledge, skill, and experience in regard to the subject-matter. This duty is to be performed by the appraisers mainly by the aid of a personal examination of the premises, and an application of their personal knowledge. They are not expected to hold a formal session of court to determine an entire controversy after hearing pleadings, evidence, and argument. Their proceedings resemble more the process of taking expert testimony. Whether mere valuers or appraisers thus appointed for such a purpose can bo doomed arbitrators in any proper sense or for any purpose, there is no occasion to decide. The authorities are not in harmony upon the subject. See Morse, Arbitration and Award, 38, 42, and cases cited. It is not necessary to follow the different courts in their ingenious efforts to trace, for all cases, a line of distinction between a mere appraisement and an ordinary submission to arbitration. The result may be that such appraisers are properly considered arbitrators for some purposes, but not in all respects. All are in-vested with quasi-judicial functions, which must be discharged with absolute impartiality, without the improper interference of either party, or undue influence from any source. But appraisers may be said to act in the twofold capacity of arbitrators and experts. In their character of experts they not only give effect to opinions based directly on their personal experience and knowledge, but also opinions founded in some measure upon information which may not be so direct and original as to be competent in itself as primary evidence. A witness called as an expert is expected before testifying to refresh his memory and confirm his judgment by an examination of authorities and conference with other experts. The umpire did precisely this, and no more, in the case at bar." Bangor Savings Bank v. Niagara Fire Ins. Co., 85 Me. 68, 35 Am. St. Rep. 341, 20 L. R. A. 650, 26 Atl. 991.
The authorities are however, not in accord upon questions of this sort, and such a reference has been said to be at least in the nature of an arbitration, if not an arbitration in the proper sense of the term.5 An architect who, by the terms of the building contract, is given power to determine questions of the performance of such contract, is treated as an arbitrator.6
2 England. Scott v. Avery, 5 H. L. Cas. 811.
Kansas. Guild v. Atchison, Topeka & Santa Fe Ry., 57 Kan. 70, 57 Am. St. Rep. 312, 33 L. R. A. 77, 45 Pac. 82.
Maine. Bangor Savings Bank v. Niagara Fire Ins. Co., 85 Me. 68, 35 Am. St. Rep. 341, 20 L. R. A. 650, 26 Atl. 991.
Minnesota. State v. Equitable Surety Co., 140 Minn. 48, 167 N. W. 202.
Wisconsin. State v. Maik, 113 Wis. 239, 89 N. W. 183.
3Leeds v. Burrows, 12 East 1; Currey v. Lackey, 35 Mo. 389.
4 State v. Equitable Surety Co., 140 Minn. 48, 167 N. W. 292.
5Chambers v. Goldthorpe , 1 K. B. 624; Janney v. Goehringer, 52 Minn. 428, 54 N. W. 481 [citing, Schrei-ber v. German-American Hail Ins. Co., 43 Minn. 367, 45 N. W. 708; Smith v. Boston, Concord & Montreal R. R., 36 N. H. 458, and Van Cortlandt v. Underbill, 17 Johns. (N. Y.) 4051; Stubbings v. McGregor, 86 Wis. 248, 56 N. W. 641.
6 Chambers v. Goldthorpe , 1 K. B. 624.
The name which is to be applied to the proceedings is of little practical importance. The confusion as to the name which is to be given in such cases generally grows out of one of three questions of vital importance. A covenant in advance for arbitration of the entire subject-matter is regarded as inoperative, since it ousts the courts of their jurisdiction and is accordingly contrary to the ideas of public policy entertained by most courts.7 A contract for arbitration as to a single fact or for arbitration as a condition precedent, is, on the other hand, valid and enforceable.8 For these reasons courts have sometimes attempted to distinguish between covenants for arbitration generally which are invalid, and covenants providing for means of ascertaining specific facts which are spoken of as covenants for appraisement. If the transaction is an arbitration in the proper sense of the term, the arbitrators must ordinarily give to the parties to the original dispute notice of the hearing and an opportunity to offer evidence.9 In case of an appraisement, on the other hand, notice and an opportunity to submit evidence are frequently unnecessary.10 For this reason the courts frequently attempt to distinguish between arbitration and appraisement or some other method of ascertaining a particular fact. If the party who is to ascertain the fact in question, is acting in a purely clerical or ministerial capacity, he may be liable to his employer for negligence; while if he is acting as an arbitrator, or if his position is in the nature of an arbitrator, he is not liable for negligence, but only for fraud, collusion, and the like.11