|
The Third Circuit Court of Appeals has ruled that an arbitration clause did not require arbitration where the dispute arose nearly three years after the underlying contract had expired and the parties thereafter continued their business relationship without a written contract.
In Bogen Communications, Inc. v. Tri-Signal Integration, Inc., No. 06-1987, 2007 WL 1109237 (3d Cir. Apr. 13, 2007), Tri-Signal Integration, Inc. (TSI) had signed a sound system distribution contract with manufacturer Bogen Communications, Inc. (Bogen). However, the contract – which included an agreement to arbitrate – expired and was not renewed.
Still, TSI continued to distribute sound systems for Bogen for well over two years, at which time Bogen began sending termination letters to TSI. TSI ultimately responded by suing Bogen for breach of an implied-in-fact contract.
In rejecting Bogen's attempt to enforce the arbitration agreement in the original contract, the Court noted that Bogen chose not to renew the contract, and the dispute over termination did not arise until more than two years after the original contract had expired.
In addition, the Court noted that the way in which the companies did business together had "materially" changed after the written contract had expired, so the dispute clearly did not relate back to the written contract, leaving no valid arbitration agreement to enforce.
Subscribe to a free weekly update on ADR case law and
legislation
|