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Arbitration agreements contained within a series of unsigned sales contracts are enforceable where the nature of the ongoing business relationship indicates the intent to be bound by the terms of the unsigned agreements, according to a California federal court.
In Maxit Designs, Inc. v. Coville, Inc., No. CIV. S-05-1040 WBS DAD, 2006 WL 2734366 (E.D. Cal. Sep. 25, 2006), the United States District Court for the Eastern District of California held that series of unsigned sales agreements containing arbitration terms were enforceable under New York law.
Coville, a defendant in a lawsuit for fraud, unfair competition, and breach of contract, moved to compel arbitration of plaintiff Maxit Designs’ claims. The claim was based on a series of over 70 individual sales contracts, all of which contained similar language, including a choice-of-law provision electing New York law and an arbitration clause. Yet, only a few of these contracts contained signatures, and Maxit Designs claimed that it could pursue narrow claims focused solely on a breach of the original oral agreement through the courts.
The Court disagreed, finding that the companies’ ongoing business relationship supported validity of all sales agreements, as well as broad application of their arbitration provisions. In New York, an arbitration clause within a written agreement is enforceable, even if the agreement is not signed, so long as there is evidence “that the parties intended to be bound by the contract.” God’s Battalion of Prayer Pentecostal Church, Inc. v. Miele Assocs., LLP,6 N.Y.3d 371, 373 (N.Y. 2006).
As for the question of arbitrability, the Court rejected Maxit Designs’ argument that its claim only referenced the original oral agreement between the parties and not Coville’s performance under the written agreements. The Court determined that Maxit Designs’ claims “touched” matters covered by the parties written agreements and were, therefore, arbitrable.
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