Matter of Schlaifer v. Sedlow, 51 N.Y.2d 181 (1980)
When parties agree to a broad arbitration clause in a contract, all disputes arising from that contract, including those concerning subsequent agreements that modify or terminate the original contract, are to be resolved by the arbitrator.
Summary
Schlaifer, a subcontractor, entered into five contracts with Sedlow for construction work. A dispute arose, and the parties attempted to settle their differences. Sedlow claimed an agreement was reached on March 21, 1979, and sought arbitration to enforce it. Schlaifer denied the agreement’s existence, noting its proposed draft was rejected. The Court of Appeals held that the broad arbitration clauses in the original contracts encompassed disputes about subsequent agreements, including the alleged settlement. Therefore, the dispute was subject to arbitration, and the lower court’s stay of arbitration was reversed.
Facts
Plaintiff Schlaifer, as a subcontractor, entered into five written contracts with the defendants Sedlow for construction work.
A dispute arose regarding the performance of these contracts.
Representatives from both parties met to resolve their differences, resulting in an alleged settlement agreement on March 21, 1979.
Sedlow sought to enforce this agreement through arbitration, based on the arbitration clauses in the original contracts.
Schlaifer disputed the existence of a binding settlement, arguing that the proposed draft agreement was rejected.
Procedural History
The lower court granted a stay of arbitration, preventing the dispute from being resolved through arbitration.
The Appellate Division affirmed the lower court’s decision.
The Court of Appeals reversed the Appellate Division’s order, denying the stay of arbitration and compelling the parties to arbitrate.
Issue(s)
Whether questions concerning the existence or terms of an alleged settlement agreement between parties to a contract with a broad arbitration clause are to be resolved in arbitration.
Holding
Yes, because once parties agree to a broad arbitration clause, all questions regarding the validity and effect of subsequent documents purporting to modify or terminate the original agreement are to be resolved by the arbitrator.
Court’s Reasoning
The Court emphasized the broad language of the arbitration clauses in the original contracts, which stated that “[a]ll disputes arising out of this Contract, its interpretation, performance or breach, shall be submitted to arbitration”.
The Court reasoned that such broad provisions encompass all disputes arising out of the contracts, including those related to subsequent agreements concerning obligations under the original contracts.
The Court cited its prior holding that “[o]nce the parties to a broad arbitration clause have made a valid choice of forum, as here, all questions with respect to the validity and effect of subsequent documents purporting to work a modification or termination of the substantive provisions of their original agreement are to be resolved by the arbitrator”.
The Court distinguished this case from situations where public policy would be offended by submitting a dispute to arbitration, finding no such offense here.
The Court noted that the admissibility of evidence concerning the negotiations of the alleged settlement agreement is a question for the arbitrator to determine.
The decision reflects a policy favoring arbitration as a means of resolving disputes when parties have contractually agreed to it.