Arbitration Clauses Contained in Unsigned Agreements are Enforceable
August, 2006
The New York Court of Appeals, New York’s highest court, has recently reiterated its long standing rule that an arbitration clause in a written agreement is enforceable, even if the agreement is not signed, when it is evident that the parties intended to be bound by the contract. God’s Battalion of Prayer Pentecostal Church, Inc. v. Miele Associates, LLP, 6 N.Y.3d 371, 845 N.E.2d 1265, 812 N.Y.S.2d 435 (2006).
Plaintiff-appellant God’s Battalion of Prayer Pentecostal Church, Inc. (“God’s Battalion”) operated a church and school in Brooklyn, New York. In May, 1995, God’s Battalion hired Defendant Miele Associates, LLP (“Miele”), an architectural firm, to expand and renovate its facilities. Miele sent an agreement, which contained an arbitration clause, to God’s Battalion. The agreement was a “Standard Form of Agreement Between Owner and Architect” published by the American Institute of Architects. The arbitration clause specifically stated that “[a]ll claims, disputes and other matters in question arising out of, or relating to, this Agreement or the breach thereof shall be decided by arbitration.” God’s Battalion received the agreement, but never signed it.
Miele recommended that God’s Battalion hire Ropal Construction Corp. as the general contractor. After Ropal Construction Corp. failed to perform the construction project to God’s Battalion’s satisfaction, God’s Battalion brought suit against Miele asserting breach of contract and architectural malpractice. The Complaint specifically alleged that Miele “failed to perform the terms, covenants and conditions of the agreement.” Miele sought to settle the matter, pursuant to the contract, through arbitration; God’s Battalion refused.
Miele moved for an order permanently staying the litigation and compelling God’s Battalion to arbitrate the case. God’s Battalion argued that neither party executed the agreement and no meeting of the minds had occurred; therefore, the mandatory arbitration provision was unenforceable.
The trial court and Appellate Division ordered the parties to arbitrate the agreement.
The Court of Appeals affirmed the trial court’s and Appellate Division’s holdings. The Court began by citing the long standing rule that “‘[t]here is no requirement that the writing be signed so long as there is other proof that the parties actually agreed on it.’” God’s Battalion, 6 N.Y.3d at 374, quoting Crawford v. Merril Lynch, Pierce, Fenner & Smith, 35 N.Y.2d 291, 319 N.E.2d 408, 361 N.Y.S.2d 140 (1974); and citing Flores v. Lower E.Slide Serv. Ctr., Inc., 4 N.Y.2d 363, 151 N.E.2d 197, 175 N.Y.S.2d 39 (2005). Next, the Court, citing In the Matter of Waldron, 61 N.Y.2d 181, 461 N.E.2d 273, 473 N.Y.S.2d 136 (1984), held that arbitration cannot be enforced unless the evidence establishes the parties’ “clear, explicit and unequivocal” agreement to arbitrate. God’s Battalion, 6 N.Y.3d at 374. However, the Court further stated, “our case law makes it clear that a signature is not required.” Id.
Applying this case law, the Court found that both parties intended to be bound by the agreement sent by Miele, even though God’s Battalion did not sign it. Id. First, both parties operated under the agreement’s terms. Second, God’s Battalion’s Complaint alleged that Miele breached the same agreement, which contained the arbitration clause. Finally, the Court found further support for its position in the fact that God’s Battalion did not dispute that the arbitration clause would be enforceable if the contract was, in fact, signed. Thus, the Court held that the unsigned contract was enforceable. Id. Finally, the Court reiterated that a contract “should be read to give effect to all its provisions,” and upheld the lower courts’ rulings. Id. (citations omitted).
Learning Point:
In New York, as a result of the Court of Appeal’s decision in God’s Battalion, an agreement containing an arbitration clause is not necessarily required to be signed by either party for it to be enforceable. If the parties operate pursuant to an unsigned contract’s terms and conditions, New York courts will enforce the agreement. •Back to New York CM Report of Recent Decisions (2006v2) 2006 Volume 2 Table of Contents
