PRESENT: All the Justices 

TM DELMARVA POWER, L.L.C., ET AL. 

 OPINION BY 

v. Record No. 010024 JUSTICE DONALD W. LEMONS 

 January 11, 2002 

NCP OF VIRGINIA, L.L.C. 

FROM THE CIRCUIT COURT OF ACCOMACK COUNTY 

Glen A. Tyler, Judge 

 In this interlocutory appeal, pursuant to Code § 8.01-

581.016(1), we consider whether the trial court erred in denying 

a motion to compel arbitration. 

I. Facts and Proceedings Below 

 In October 1999, TM Delmarva Power, L.L.C. (“TMDP”) and NCP 

of Virginia, L.L.C. (“NCP”) entered into an operating agreement 

(“Agreement”) to construct a power plant. TMDP and NCP formed 

Commonwealth Chesapeake Company, L.L.C. (“CCC”) to develop, 

construct, finance, own, and operate the power plant. The 

Agreement includes Section 11.12, entitled “Dispute Resolution.” 

Section 11.12(a) establishes procedures for dispute resolution 

by certain designated “Conciliators,” and Section 11.12(b) 

provides for “Resolution by Arbitration.” 

 A conflict arose regarding the propriety of capitalizing 

certain expenses and TMDP’s right to hire a national accounting 

firm to serve as an accountant and auditor for CCC. NCP 

initiated a conciliation procedure in accordance with Section 

11.12(a) of the Agreement. The conciliation procedure proved 
unsuccessful and NCP filed a bill for declaratory judgment. 

TMDP subsequently filed a motion to compel arbitration and for 

stay, alleging that “Section 11.12 of the Operating Agreement 

contain[ed] a comprehensive and binding conciliation and 

arbitration procedure applicable to ‘any material dispute, 

disagreement or controversy concerning this Agreement.’ ” NCP 

opposed the motion to compel, arguing that, “[a] mere agreement 

to submit to arbitration and no more does not constitute a 

condition precedent and will not prevent a party from 

maintaining an action in a court of law to enforce its rights 

under the contract.” The trial court denied TMDP’s motion to 

compel on the ground that the Agreement did not compel 

arbitration. TMDP appeals the adverse ruling of the trial 

court. 

II. Standard of Review 

 We are not bound by the trial court’s construction of 

contract terms, but rather, “[w]e have an equal opportunity to 

consider the words within the four corners of the disputed 

provision.” Wilson v. Holyfield, 227 Va. 184, 188, 313 S.E.2d 

396, 398 (1984). Therefore, we consider the arbitration 

provision of the Agreement de novo. 

III. Analysis 

 TMDP argues that the trial court erred by failing to give 

effect to the plain meaning of the terms in the Agreement. 

2
According to TMDP, the arbitration clause plainly means that the 

parties agreed to arbitrate their disputes upon the request of 

either party. NCP maintains that the word “may” in the 

arbitration provision renders the provision permissive, not 

mandatory; therefore, NCP contends that it reserved its right to 

pursue litigation despite TMDP’s request for arbitration. 

 Contracts between parties are subject to basic rules of 

interpretation. Contracts are construed as written, without 

adding terms that were not included by the parties. Wilson, 227 

Va. at 187, 313 S.E.2d at 398. Where the terms in a contract 

are clear and unambiguous, the contract is construed according 

to its plain meaning. Bridgestone/Firestone v. Prince William 

Square Assocs., 250 Va. 402, 407, 463 S.E.2d 661, 664 (1995); 

Ross v. Craw, 231 Va. 206, 212, 343 S.E.2d 312, 316 (1986). A 

contract is not ambiguous merely because the parties disagree as 

to the meaning of the terms used. Id. at 212-13, 343 S.E.2d at 

316. Furthermore, contracts must be considered as a whole 

“without giving emphasis to isolated terms.” American Spirit 

Ins. Co. v Owens, 261 Va. 270, 275, 541 S.E.2d 553, 555 (2001). 

Finally, no word or clause in a contract will be treated as 

meaningless if a reasonable meaning can be given to it, and 

parties are presumed not to have included needless words in the 

contract. D.C. McClain, Inc. v. Arlington County, 249 Va. 131, 

135-36, 452 S.E.2d 659, 662 (1995). 

3
 The clause in dispute, Section 11.12. Dispute Resolution, 

provides in pertinent part: 

(a) Resolution by Conciliators. If any 

material dispute, disagreement or 

controversy between the Parties arises with 

respect to this Agreement, and it cannot be 

settled by mutual accord, any Party may seek 

to have the dispute resolved in accordance 

with the following procedures: 

 (i) Either Party may refer the 

 disagreement to the chief executive 

 officer or equivalent of each of the 

 Parties or to another executive. . .

 (the “Conciliators”). . . . 

 (ii) The procedure for resolving such 

 dispute shall in each instance be 

 determined by the Conciliators. . . 

(b) Resolution by Arbitration. If any 

material dispute, disagreement or 

controversy concerning this Agreement is not 

settled in accordance with the procedures 

set forth in Section 11.1(ii)[sic]. . . then 

either Party may commence arbitration 

hereunder by delivering to the other Party a 

notice of arbitration. 

 In its entirety, Section 11.12 of the Agreement establishes 

a two-step mechanism that either party may employ for the 

resolution of disputes concerning the Agreement. In the present 

case, NCP invoked Section 11.12(a) when it initiated 

conciliation procedures. When the conciliation procedures 

proved unsuccessful, NCP filed suit and TMDP responded by 

invoking Section 11.12(b) concerning arbitration. 

4
 The language of Section 11.12 essentially constructs an “if 

– then” proposition –- if a party seeks conciliation and it is 

not successful, then either party may require arbitration. The 

word “may,” as used in both Sections 11.12(a) and (b), means 

that either party may invoke the dispute resolution procedures, 

but neither is compelled to invoke the procedures. Once a party 

invokes the conciliation procedures1, the other party is bound to 

participate. Likewise, once a party invokes the arbitration 

provision, the other party is bound to arbitrate. 

 In order to interpret the provision as requiring the 

consent of the non-initiating party before proceeding to 

arbitration, we would have to add the words “with the consent of 

the other party” following the phrase “either [p]arty may 

commence arbitration.” However, our rules of contract 

interpretation do not permit the addition of words not included 

by the parties. Wilson, 227 Va. at 187, 313 S.E.2d at 398. 

 Furthermore, if we were to find the arbitration provision 

permissive, even when invoked by a party, the provision would be 

rendered meaningless and unnecessary because parties can choose 

to submit disagreements to arbitration without specific 

arbitration clauses. A wholly permissive arbitration provision 

would be meaningless, and we will not treat a contract provision 

 1

 The arbitration provision is at issue in the present case, 

therefore our discussion will be limited to that provision only. 

5
as meaningless when a reasonable meaning can be given to it. 

D.C. McClain, Inc., 249 Va. at 135, 452 S.E.2d at 662. 

 NCP argues that the use of the word “may” renders the 

arbitration clause permissive; therefore, NCP argues, neither 

party is bound to submit disputes to arbitration but can pursue 

litigation if it chooses. NCP’s interpretation of the clause 

puts too much emphasis on an isolated word and ignores the 

context in which the word is used. American Spirit, 261 Va. at 

275, 541 S.E.2d at 555. As we stated in Pettus v. Hendricks, 

113 Va. 326, 330, 74 S.E. 191, 193 (1912), while the word 

“shall” is primarily mandatory in effect, and “may” is primarily 

permissive in effect, “courts, in endeavoring to arrive at the 

meaning of written language, whether used in a will, a contract, 

or a statute, will construe ‘may’ and ‘shall’ as permissive or 

mandatory in accordance with the subject matter and context.” 

 Here, the word “may” is permissive, but it clearly means 

that either party has the discretion to choose arbitration if 

conciliation is not successful. However, once this discretion 

is exercised, arbitration is compelled under the agreement.

 Numerous decisions from other jurisdictions support our 

interpretation of the dispute resolution clause in this case. 

State courts in Maine2, Kentucky, and California3 have 

 2

 See Orthopedic Physical Therapy Ctr., P.A. v. Sports 

Therapy Ctrs., Ltd., 621 A.2d 402 (Me. 1993) (finding 

6
interpreted similar dispute resolution clauses to mean that 

arbitration is mandatory once initiated by a party. For 

example, the Supreme Court of Kentucky interpreted a similar 

provision that stated, “[a]ll claims, disputes and other matters 

. . . arising out of, or relating to, the [contract]. . . may be 

decided by arbitration.” City of Louisa v. Newland, 705 S.W.2d 

916, 917 (Ky. 1986). The court held that the use of the word 

“may” in the arbitration provision made arbitration compulsory 

“once either party demand[ed] it,” and found the contract 

mutually binding on both parties. Id. at 919. 

 Several federal decisions also support this interpretation 

of the arbitration provision. For example, the United States 

Court of Appeals for the Fourth Circuit examined an arbitration 

provision that stated, “[i]f any misunderstanding or dispute 

arises . . . such misunderstanding or dispute may be submitted 

to arbitration.” United States v. Bankers Ins. Co., 245 F.3d 

315, 318 (4th Cir. 2001). The court held that the “use of 

permissive phraseology is not dispositive.” Id. at 320. 

Accordingly, the court found that the clause had the effect of 

 

arbitration mandatory when requested by a party under the 

arbitration clause that stated “disputes. . . may be settled by 

arbitration.”) 

3

 See Service Employees Int’l Union, Local 18, AFL-CIO v. 

American Bldg. Maint. Co., 29 Cal. App. 3d 356 (1972) (holding 

that a provision which stated “the issue in dispute may be 

submitted to an impartial arbitrator” gave an employee a right 

7
giving the aggrieved party the choice “between arbitration and 

abandonment of his claim.” Id. at 321. 

 The United States Court of Appeals for the Eighth Circuit4

similarly found that an agreement providing that disputes or 

disagreements “may be submitted to arbitration” reflected that 

the parties intended arbitration to be mandatory. American 

Italian Pasta Co. v. The Austin Co., 914 F.2d 1103 (8th Cir. 

1990). The court held that there would be no reason for the 

arbitration language if the parties intended arbitration to be 

permissive because parties can always voluntarily agree to 

submit to arbitration even in the absence of an arbitration 

provision. Id. at 1104. 

 Finally, the public policy of Virginia favors arbitration. 

Virginia adopted the Uniform Arbitration Act in 1986, and the 

Code states in pertinent part that “[a] written agreement . . . 

to submit to arbitration any controversy . . . arising between 

the parties is valid, enforceable and irrevocable, except upon 

such grounds as exist at law or in equity for the revocation of 

 

to have the issue submitted to arbitration, regardless of the 

use of the word “may.”) 

4

 The United States Court of Appeals for the Eighth Circuit 

had occasion to interpret another similar arbitration provision 

in Bonnot v. Congress of Indep. Unions Local #14, 331 F.2d 355 

(8th Cir. 1964). The collective bargaining agreement in Bonnot

stated that “either party may request arbitration.” Id. at 356. 

The court held that the word “may” in the clause did not render 

the clause permissive, but instead gave an aggrieved party the 

8
any contract.” Code § 8.01-581.01. This language illustrates 

Virginia’s public policy in favor of arbitration and the 

validity of arbitration agreements. In light of Virginia’s 

public policy and the plain language of the Agreement, we hold 

that the arbitration provision in the present case provides for 

mandatory arbitration once arbitration is requested by either 

party. 

 Accordingly, we will reverse the judgment of the trial 

court, and remand with instructions to enter an order compelling 

arbitration. 

Reversed and remanded.

JUSTICE LACY, with whom JUSTICE HASSELL and JUSTICE KOONTZ join, 

dissenting. 

 I respectfully dissent from the majority's opinion in this 

case. 

 This case presents an issue of first impression for the 

Supreme Court of Virginia: whether contractual language 

permitting one party to pursue arbitration constitutes the 

parties' written agreement to arbitrate their disputes upon the 

election of either party. 

 "[A]rbitration is a matter of contract and a party cannot 

be required to submit to arbitration any dispute which he has 

 

choice between arbitration or abandonment of their claim. Id.

at 359. 

9
not agreed so to submit." AT&T Technologies, Inc. v. 

Communications Workers of America, 475 U.S. 643, 648 (1986); see

also Doyle & Russell, Inc. v. Roanoke Hosp. Ass'n, 213 Va. 489, 

494, 193 S.E.2d 662, 666 (1973). The contract in the present 

case contains no language that clearly demonstrates the parties' 

agreement that invocation of arbitration by one party would bind 

the other party to an arbitration proceeding. The contract 

states only that, "either Party may commence arbitration 

hereunder by delivering to the other Party a notice of 

arbitration." Because of the ambiguity in this contract, 

general rules of contract interpretation must be used to 

determine whether the parties had an agreement to arbitrate. 

See United States v. Bankers Ins. Co., 245 F.3d 315, 319 (4th 

Cir. 2001). 

 The majority's conclusion that permissive language must be 

construed as mandatory is based on the rationale that to do 

otherwise would render the arbitration clause meaningless. 

However, the cases upon which the majority relies, Bankers 

Insurance Company, 245 F.3d 315 (4th Cir. 2001); American 

Italian Pasta Company v. The Austin Company, 914 F.2d 1103 (8th 

Cir. 1990); Bonnot v. Congress of Independent Unions Local #14, 

331 F.2d 355 (8th Cir. 1964); Service Employees International 

Union, Local 18 v. American Building Maintenance Company, 29 

Cal. App. 3d 356 (1972); City of Louisa v. Newland, 705 S.W.2d 

10
916 (Ky. 1986); and Orthopedic Physical Therapy Center v. Sports 

Therapy Centers, 621 A.2d 402 (Me. 1993), do not support the use 

of this rationale in the context of this case. 

Bonnot and Service Employees were labor cases in which the 

arbitration clauses at issue were part of collective bargaining 

agreements, which required the parties to exhaust the grievance 

procedures provided in the agreements before pursuing 

litigation. The language of the contracts was permissive and 

allowed either party to elect arbitration. In these cases, the 

courts held that the term "may" was intended to give the parties 

the choice of arbitrating their complaints or abandoning them. 

Because the parties had no options outside of the agreements 

until they exhausted all grievance procedures within the 

agreement, their choice of arbitration would be meaningless 

unless their election of arbitration mandated the participation 

of the other parties. Bonnot, 331 F.2d at 359; Service 

Employees, 29 Cal. App. 3d at 360; see also Austin v. OwensBrockway Glass Container, Inc., 78 F.3d 875 (4th Cir. 1996). 

American Italian Pasta Co. did not involve a collective 

bargaining agreement but applied Bonnot in a non-labor context 

where the language of the contract limited the parties' right to 

pursue legal action until after the parties pursued dispute 

resolution procedures prescribed by the contract. 

11
 Thus in these cases, the arbitration clauses were part of 

agreements which required compliance with dispute resolution 

processes before recourse to the courts. If a party could 

refuse a request for arbitration by the other party, the 

requesting party would be forced to abandon its claim because 

under the agreement judicial relief could not be invoked without 

exhaustion of the resolution procedures, including arbitration. 

 In the instant case, however, the parties were not subject 

to a collective bargaining agreement or any other separate 

agreement or clause requiring that that dispute resolution 

mechanisms be exhausted prior to litigation. Nothing in the 

terms of the contract limited the options of the parties such 

that failure of one party to participate in either conciliation 

or arbitration would leave the complaining party without a 

remedy. The contract, as written, made two dispute resolution 

options available to an aggrieved party and did not limit any 

party's access to the courts. Therefore, unlike the Bonnot line 

of cases, the arbitration option does not have to be mandatory 

to make a party's choice of that option meaningful. Cf. State 

of the Arts, Inc. v. Congress Property Management Corp., 688 

A.2d 926, 928 (Me. 1997). 

 The second argument made by this line of cases is that the 

parties could have voluntarily agreed to arbitration at any 

time, and, therefore, the inclusion of an arbitration clause 

12
would be meaningless unless it was intended to express the 

parties' agreement to arbitrate. Bankers Ins. Co., 245 F.3d at 

321; American Italian Pasta Co., 914 F.2d at 1104; City of 

Louisa, 705 S.W.2d at 919; Orthopedic Physical Therapy Ctr., 621 

A.2d at 403. 

 The arbitration clause in Bankers Insurance Company was a 

stand-alone clause that did not introduce any procedures for 

arbitration, but merely stated that any "misunderstanding or 

dispute may be submitted to arbitration." 245 F.3d at 318. 

Unlike the clause at issue in this case, that clause would have 

been purposeless if it were not an expression of the parties' 

agreement to arbitrate. 

 The arbitration clause in City of Louisa would not only 

have been meaningless if it did not mandate the participation of 

both parties at either party's election of arbitration, it also 

would have been contrary to language in the remainder of the 

arbitration clause. The agreement at issue in City of Louisa

stated that, "all claims, disputes and other matters . . . may 

be decided by arbitration." 705 S.W.2d at 917. The sentences 

following specifically refer to "[t]his agreement to arbitrate" 

and to the "demand for arbitration" that the electing party 

files with the other party. Id. Read in context, the 

permissive arbitration language was followed by language that 

made clear the parties' agreement to arbitrate and that either 

13
party may "demand" the other's participation in arbitration. By 

contrast, the arbitration clause at issue in the present case 

includes the phrase "notice of arbitration shall specify the 

matters as to which arbitration is sought." (emphasis added) 

Contrary to the language in City of Louisa, a party in this case 

does not have the right to demand arbitration, but may only seek 

to have arbitration. The non-compulsory nature of the phrase 

"to which arbitration is sought," when contrasted with the 

language from City of Louisa is even more evidence that the 

dispute resolution provision in the present case does not 

include an agreement to arbitrate. 

 As discussed above, American Italian Pasta Company relies 

on the reasoning of the Bonnot case for its holding and only 

secondarily includes the statement that the arbitration clause 

would be meaningless if it were not mandatory because the 

parties could agree to arbitrate in the absence of such a 

clause. 914 F.2d at 1104. But while both American Italian 

Pasta Co. and Orthopedic Physical Therapy Ctr. recite this 

principle, they do no more than state it and fail to explain its 

application to the circumstances of those cases. Therefore, 

they have little precedential value. 

 As NCP points out, this Court has held that "words are not 

meaningless merely because they impose no legal obligation. 

Parties frequently include precatory language in agreements 

14
. . . to express a sentiment, wish, or desire with regard to the 

parties' future course of conduct." Ross v. Craw, 231 Va. 206, 

214-15 (1986). The majority recognizes that "the word 'may' is 

permissive, but it clearly means that either party has the 

discretion to choose arbitration if conciliation is not 

successful." This is the plain meaning of the subject clause 

and it does not become meaningless simply because it does not 

create a legal obligation for the other party to participate in 

arbitration. Instead, it has meaning because it introduces the 

option of arbitration as a means of dispute resolution and the 

remainder of § 11.12 of the contract, which mandates the 

procedures that the parties must follow if arbitration is 

pursued. 

 Finally, the majority relies upon a public policy in favor 

of arbitration. Public policy in Virginia is by no means 

against arbitration, but the cases both in Virginia and in other 

jurisdictions that discuss the presumption in favor of 

arbitration do so in terms of the scope of arbitration 

agreements, not the existence of such agreements. The 

presumption is applied when a court is trying to determine 

whether the conflict at issue is within the scope of an already 

established agreement to arbitrate. The presumption in favor of 

arbitrability arises only after a determination has been made 

that the parties agreed to arbitrate. First Options of Chicago, 

15
Inc. v. Kaplan, 514 U.S. 938, 945-46 (1995); Bell Atlantic 

Corporation v. CTC Communications Corp., 1998 Va. LEXIS 20160 

(2nd Cir. 1998); Bonnot, 331 F.2d at 359. The present case 

calls upon this Court to determine whether there is an agreement 

to arbitrate, not whether an issue falls within the scope of 

that agreement. Therefore, the presumption in favor of 

arbitrability does not apply.

 Instead, legal precedent relevant to these determinations 

discusses the importance of a party's "right to a court's 

decision about the merits of its dispute," a right that is 

relinquished by an agreement to arbitrate. First Options of 

Chicago, 514 U.S. at 942; cf. Waterfront Marine Construction, 

Inc. v. North End 49ers Sandbridge Bulkhead Groups A, B and C, 

251 Va. 417, 426-27, 468 S.E.2d 894, 899 (1996). It is this 

principle, that all parties have an important right to judicial 

resolution of their conflicts, that should serve as a guide when 

interpreting the language of a contract. 

 For these reasons, I believe that the cases relied upon by 

the majority do not support the holding that TMDP and NCP had an 

agreement to arbitrate. Rather, I conclude that the arbitration 

clause is meaningful without mandating arbitration because it 

introduces a dispute resolution option and the procedures to be 

followed if the parties elect arbitration and, applying the 

principle that parties have a right to judicial resolution of 

16
their conflicts, an agreement to arbitrate must be clearly 

understood from the terms of the contract. Finding no such 

agreement in this contract, I would affirm the judgment of the 

trial court. 

17