49 A.D.2d 168 (N.Y. App. Div. 1975)

Under a broad arbitration clause, questions of contract interpretation, including whether prerequisites to arbitration exist, are for the arbitrator to decide.

Summary

Kinoshita, a subcontractor, sought arbitration with Regan, the general contractor, regarding a claim arising from their subcontract. Regan moved to stay arbitration, arguing that Kinoshita failed to comply with conditions precedent in the general contract (referral to the architect, timely demand). The court held that the broad arbitration clause in the subcontract delegated questions of contract interpretation, including the existence and applicability of conditions precedent, to the arbitrator. The arbitrator, not the court, must determine if the general contract’s prerequisites apply to the subcontract claim and whether Kinoshita satisfied them.

Facts

Kinoshita (subcontractor) and Regan (general contractor) were parties to a subcontract for site preparation for a New York Telephone building. The subcontract contained a broad arbitration clause covering “all disputes, controversies or claims of any and all kinds which may arise out of, under or in relation to this Agreement.” The subcontract incorporated provisions of the general contract between Regan and the owner. The general contract contained two arbitration clauses: a broad clause and a clause requiring initial submission of certain disputes to the architect with a reasonable time limit for demanding arbitration.

Procedural History

Kinoshita demanded arbitration under the subcontract. Regan sought a stay of arbitration, alleging failure to comply with the general contract’s conditions precedent (architect referral, timely demand). Special Term denied the stay and compelled arbitration, finding the general contract’s conditions inapplicable to the subcontract. The Appellate Division affirmed, leading to Regan’s appeal.

Issue(s)

Whether, under a broad arbitration clause in a subcontract incorporating terms of a general contract, the question of whether the general contract’s prerequisites to arbitration (referral to architect, timely demand) apply to disputes under the subcontract is an issue for the court or the arbitrator.

Holding

No, because under a broad arbitration clause, the interpretation of contract provisions, including the applicability of conditions precedent to arbitration, is a matter for the arbitrator to decide.

Court’s Reasoning

The court emphasized that the crucial issue was not *whether* conditions precedent were fulfilled, but *whether* the subcontract even required them in the first place. Resolution of this preliminary question necessitates interpreting the contracts, a task generally reserved for arbitrators under broad arbitration clauses. The court cited Matter of Exercycle Corp. (Maratta), stating that “[i]f the issue involved was solely one of construction or interpretation, it would, without a doubt, be for the arbitrators to decide.” The court reasoned that because the parties agreed to submit “all disputes” to arbitration, they agreed to submit questions of contract interpretation as well. The court noted the principle’s particular relevance to standardized forms (like those from the American Institute of Architects) where arbitration is the expected dispute resolution method. The general contractor remains free to argue before the arbitrator that the general contract’s prerequisites should be read into the subcontract. The court distinguished cases where the *existence* of a condition precedent was agreed upon, and the dispute concerned only its performance. Here, the threshold issue is whether the condition applies at all, which is an issue of contract interpretation for the arbitrator.