L. 1921, ch. 14.

Validity of agreements.

§ 2.

method of procedure in the New York courts and is not applicable in the federal courts of admiralty. Atlanta Fruit Co. v. Red Cross Line (1921), 276 Fed. 319.

§ 2. Validity of arbitration agreements.-A provision in a written contract to settle by arbitration a controversy thereafter arising between the parties to the contract, or a submission hereafter entered into of an exsisting controversy to arbitration pursuant to title eight of chapter seventeen of the code of civil procedure, or article eighty-three of the civil practice act, shall be valid, enforcible and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. (Amended by L. 1921, ch. 14, in effect April 15, 1921.)

The word "irrevocable," as used in section 2 of article 2 of the Arbitration Law providing that an arbitration agreement "shall be valid, enforcible and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract," means that the contract to arbitrate cannot be revoked at the will of one party to it, but can only be set aside for facts existing at or before the time of its making which would move a court of law or equity to revoke any other contract or provision of a contract. It does not mean that the agreement to arbitrate is irrevocable by the mutual agreement or consent of the parties. Matter of Zimmerman v. Cohen (1923), 236 N. Y. 15, revg. 204 App. Div. 375, 198 N. Y. Supp. 139.

This section declares a new policy and abrogates an ancient rule.-Matter of Berkovitz v. Arbib & Houlberg (1921), 230 N. Y. 261, 130 N. E. 288, revg. 193 App. Div. 423, 183 N. Y. Supp. 304.

This statute did not attach a new obligation to sales already made.-It vindicated by a new method the obligation then existing. Matter of Berkovitz v. Arbib & Houlberg (1921), 230 N. Y. 261, 140 N. E. 288, revg. 193 App. Div. 423, 183 N. Y. Supp. 304.

An agreement to submit a question of damages to appraisers is not an agreement to submit to arbitration. Williams v. Hamilton Fire Ins. Co. (1922), 118 Misc. 799, 194 N. Y. Supp. 798.

Contract for sale of raw silk drawn on blank containing printed clause "Sales are governed by Raw Silk Rules adopted by the Silk Association of America"; raw silk division rules required compulsory arbitration, association rules did not; both parties members of association but neither party member of raw silk division, a subordinate body; arbitration of differences arising from contract not compelled; rules of interpretation of alleged contracts to arbitrate not abrogated by Arbitration Law; arbitration contracts strictly construed.-A contract for the sale of raw silk was drawn on a blank form which contained the printed clause, "Sales are governed by Raw Silk Rules adopted by the Silk Association of America." The rules of the raw silk division of said association required that all differences between buyer and seller must be submitted to the arbitration committee of the association. The association rules did not make arbitration compulsory between its members. Both parties to the contract were members of the association, but neither party was a member of the raw silk division which was a subordinate body with the right to establish its own special rules, which, however, must be approved by the association. The association had approved the compulsory arbitration rule of the raw silk division. Held, that arbitration of differences arising out of the contract cannot be compelled for the moving party has not sustained the burden of proving that the minds of the parties had met in agreeing to submit their differences, under the contract, to arbitration. Although arbitration agreements in this State are now

§ 2.

Arbitration law.

L. 1921, ch. 14.

enforcible under the Arbitration Law, the rules heretofore applicable to the interpretation of contracts to determine whether the parties have agreed to arbitrate, have not been abrogated. Since a contract to arbitrate presupposes an agreement to forego the right to resort to the courts for redress, an alleged contract to arbitrate, which is disputed, will be strictly construed in order that the parties may not be deprived of their constitutional rights to seek redress in the courts. Matter of General Silk Importing Co. (1922), 200 App. Div. 786, 194 N. Y. Supp. 15.

Provision that "Sales governed by raw silk rules adopted by the Silk Association of America" is not agreement to arbitrate.-The power of the court to direct arbitration where the same is provided for by the agreement of the parties, should not be exercised, where a contract provides that "Sales governed by raw silk rules adopted by the Silk Association of America," for such provision does not constitute an agreement to arbitrate the differences between the parties which should thereafter arise. Matter of Bachmann, Emmerich & Co. (1923), 204 App. Div. 282, 197 N. Y. Supp. 879.

Memorandum of sale construed not to provide for arbitration pursuant to rules of Silk Association of America.-A memorandum of purchase of raw silk executed by the respondent, who was not a member of the Silk Association of America, and the appellant, who was a member of said association, which had printed across its face, "Sales are governed by raw silk rules adopted by the Silk Association of America," does not constitute an agreement between the parties to relinquish all rights of appeal to the courts for redress under the contract and to submit to a determination by arbitration under the rules of said association any claim either of them might have for a breach of the contract. Matter of General Silk Importing Co. (1921), 198 App. Div. 16, 189 N. Y. Supp. 391.

Agreement between owner and contractor to submit dispute as to matters of payment to arbitration; arbitrators could consider claim made by owner for defective work or overcharge; specification of certain subjects of arbitration did not exclude others; disallowance by Special Term of items for defective work and overcharge was improper; allowance of damages for delay not supported by evidence.—The plain meaning of an agreement between an owner and a contractor for arbitration was that, in case of disagreement between them in relation to matters of payment, the dispute should be referred to arbitrators, and under that agreement it was proper for the arbitrators to take under consideration the claim by the owner against the contractor for defective material and for overcharges made. The fact that certain subjects were specifically mentioned in the agreement as matters to be submitted does not justify the conclusion that all others were intended to be excluded, but the contract should receive a reasonable construction with a view to accomplish the purpose obviously intended by the parties, which was to submit all matters of dispute to arbitration. It was error, therefore, for the trial court to disallow an item in favor of the owner for defective material and workmanship and an item for overcharge, on the ground that both items were outside the matters submitted to the arbitrators. The item allowed to the owner as damages for delay in the completion of the contract was properly disallowed by the Special Term, since there was no evidence justifying the award of damages for delay. Matter of Priore (1923), 204 App. Div. 332, 198 N. Y. Supp. 57.

Arbitration clause in assignable contract may be enforced by receiver of one of parties; receiver is party to contract.-Where a contract is assignable, an arbitration clause therein is an integral part thereof, and may be availed of by either party or his legal representatives or assigns. Accordingly, an arbitration clause in a contract for the sale of goods, which provides that "Disputes or claims of whatsoever nature relating to this contract, shall be settled by arbitration by the Arbitration Committee, N. Y. Produce exchange," and is founded upon valuable considerations between the original parties, is enforcible by a receiver of the seller

Remedy in case of default.

§ 3.

possessing power to institute suits at law or in equity to recover damages and demands existing in favor of the seller; such a receiver is a party to the contract, within the meaning of section 2 of the Arbitration Law. Matter of Lowenthal (1921), 199 App. Div. 39, 191 N. Y. Supp. 282, affd. 233 N. Y. 621, 135 N. E. 944. Arbitration directed pursuant to .terms of contract and of Arbitration Law.Matter of Israel & Bros. (1921), 197 App. Div. 931, 188 N. Y. Supp. 932.

A provision in a contract between labor unions and a street railway company in reference to the wages and working conditions of the employees, by which the company agreed "through its properly accredited officers to treat with the properly accredited officers and committee of the association on all grievances that may arise," is not an agreement to arbitrate said grievances. Matter of Amalgamated Association of Street Ry. Employees (1921), 196 App. Div. 206, 188 N. Y. Supp. 353.

Anticipatory breach of contract between traction company and employees by strike of latter. Matter of Amalgamated Assn. of Street Railway Employees (1921), 196 App. Div. 206, 188 N. Y. Supp. 353.

Agreement for arbitration held void as contravening public policy in that it is too broad and purports to oust the court of any jurisdiction to enforce the contract rights of either party or to grant redress to either party thereunder, and having been executed prior to the enactment of the Arbitration Law was unaffected thereby. Hudson Trading Co. v. Durand (1920), 194 App. Div. 248, 185 N. Y. Supp. 187.

Arbitration agreement in margin of broker's note of confirmation of sale; issue whether marginal reference to arbitration was part of contract should be summarily tried; subordinate issue whether provision for arbitration "in usual manner" meant before arbitration committee of Dried Fruit Association or under statute.A sale of fruit was evidenced by the food broker's note of confirmation in duplicate, a carbon copy being given to each of the parties. On the margin of the note there was the following clause: "Any dispute arising as to the quality of delivery on this contract to be arbitrated in the usual manner." On a motion by the buyer to compel arbitration the seller raised the question that the arbitration clause was not a part of the contract. Held, that in the absence of testimony the court could not decide that question on the petition and answer and that the seller was entitled to a summary trial thereof. Further, if it is found that the clause is a part of the contract it will be necessary to determine whether the clause providing for arbitration "in the usual manner" refers to arbitration before the board of arbitration of the Dried Fruit Association of New York, which settles many disputes of the nature of the one involved, or to arbitration pursuant to the laws of this State. Matter of Palmer & Pierce (1921), 195 App. Div. 523, 186 N. Y. Supp. 369.

Waiver of right to arbitration.-Where in an action to foreclose a mechanic's lien the answer sets up a counterclaim, a motion to compel plaintiff to name his arbitrator pursuant to a provision of the building contract will be denied on the ground that defendant had waived his right to arbitration, and had elected the tribunal for the trial of the differences between the parties arising under the contract. Hiltl Co. v. Bishoff (1922), 119 Misc. 572, 197 N. Y. Supp. 617.

An award made under a void arbitration agreement cannot be enforced where the other party thereto took no part in the award, which was evidently made by an arbitrator selected by the plaintiff to represent it, and, therefore, the defendants cannot be foreclosed from contending that the contract for arbitration was void. Hudson Trading Co. v. Durand (1920), 194 App. Div. 248, 185 N. Y. Supp. 187.

§ 3. Remedy in case of default.

This act is intended to compel a specific performance of contracts for arbritra

tion, not to create new contracts, or to impose conditions which the parties themselves have not agreed upon. The power given is to petition the Supreme Court or a judge thereof for an order directing that such arbitration proceed "in the manner provided for in such contract," not to proceed generally with an arbitration of a controversy which has not been provided for in the contract. Matter of Amalgamated Association of Street Ry. Employees (1921), 196 App. Div. 206, 188 N. Y. Supp. 353.

Provision for enforcement unknown to common law. The provision of this section for enforcement of a contract to arbitrate is a statutory legal remedy of a character unknown to the common law, and, therefore, is not embraced within the exceptions contained in the Judicial Code saving to suitors in all cases the common-law remedy where the common law is competent to give it. Matter of Red Cross Line v. Atlantic Fruit Co. (1922), 233 N. Y. 373, 135 N. E. 821, revg. 199 App. Div. 961, 191 N. Y. Supp. 949.

Jurisdiction.-Where in a proceeding under the Arbitration Law (L. 1920, ch. 275) to compel arbitration, it appears that the dispute is one of jurisdiction by the admiralty court, a state court is powerless to order a party to proceed to arbitration notwithstanding a clause of the contract provides for the arbitration of disputes arising thereunder. Matter of Red Cross Line v. Atlantic Fruit Co. (1922), 233 N. Y. 373, 135 N. E. 821, revg. 199 App. Div. 961, 191 N. Y. Supp. 949. Contract for arbitration pursuant to Arbitration Law or rules of association enforcible. It is entirely competent for parties to submit a controversy to arbitration by formal submission, or to provide in their contract that any controversy arising thereunder shall be submitted to arbitration pursuant to the Arbitration Law or pursuant to the rules adopted by an association to which they belong. Matter of General Silk Importing Co. (1921), 198 App. Div. 16, 189 N. Y. Supp. 391. Application for order appointing sole arbitrator under contract; arbitration agreement appeared below signature of agent of appellant; affidavit of agent that he did not intend to and had no authority to agree to arbitrate when he signed contract; appellant had right to jury trial of question whether parties contracted to arbitrate. The appellant, on an application for an order appointing a sole arbitrator under a contract claimed to have been entered into between the parties, was entitled, on demand made under section 3 of the Arbitration Law, to a jury trial of the question whether the parties contracted for an arbitration of their differences under said contract, where it appears that the contract was signed bv an agent; that the arbitration agreement appeared below the signature of the agent and that the agent in his affidavit read in opposition to the motion for arbitration, swore that he had no authority to sign an arbitration contract and did not intend to do so. Matter of Gresham & Co. (1922), 202 App. Div. 211, 195 N. Y. Supp. 106.

Proceedings to compel arbitration under agreement therefor; agreement not to prosecute for enroachment of building unless enroaching party built higher and then to arbitrate damages; agreement not revoked by death of party; agreement constituted covenant running with land; arbitration may be compelled under agreement. On an application to compel the appellant to proceed to arbitration pursuant to the terms of a contract agreement entered into by the appellant's predecessor and the petitioners' testatrix, it appeared that in order to avoid ligitation between the appellant's predecessor and the testatrix over an alleged encroachment of a building of the appellant's predecessor upon the public highway, which the testatrix, owner of an adjoining building, claimed injured her property, an agreement was entered into whereby the appellant's predecessor agreed that the testatrix should have the right to fully and freely use the light and air over its building as it then existed, for the benefit of her property for a period of fifty years, and she agreed for a like period not to institute proceedings based

on the encroachment. It was further provided by the agreement that in case the appellant's predecessor did build its building higher, then it would pay to the testatrix a sum of money as damages because of the encroachment, which sum was to be ascertained and determined by a board of arbitration to be selected as provided in the agreement. It was mutually convenanted and agreed that the agreement should be binding upon and accrue to the benefit of the parties thereto, their heirs, successors or assigns. Held, that said agreement was not personal to the testatrix but constituted a covenant running with the land, and that neither the cause of action abated nor was the agreement to select arbitrators revoked by her death, and that her representatives could enforce said agreement and compel arbitration thereunder. The agreement was valid and enforcible, for the rule is that a person may covenant that no right of action will accrue until a third person or persons shall determine the measure of the liability of the covenantor and the amount to which the covenantee shall be entitled. Matter of Scott (1922), 200 App. Div. 599, 193 N. Y. Supp. 403, affd. 234 N. Y. 539.

§ 4. Provision in case of failure to name arbitrator or umpire. Provision that cn failure to name arbitrator within ten days right to arbitration should lapse; such condition not illegal.-A New York building contract between an owner and an architect provided that all disputes thereunder should be submitted to arbitration at the choice of either party and that the general procedure should conform to the laws of the state in which the work was to be erected. Section 4 of the Arbitration Law provides for the selection of an arbitrator by the court in case any party shall fail to avail himself of the method provided in the contract. Held, that a contention that the provision of the contract governing the appointment of arbitrators including the penalty of failure to name the first arbitrator only applies "unless otherwise provided by such laws," was untenable, as failing to give effect to a condition of the contract that "should the party demanding arbitration fail to name an arbitrator within ten days of his demand, his right to arbitration shall lapse." There was nothing illegal in such a condition, and while it was inconsistent with section 4 of the Arbitration Law, the conflict did not nullify the effect of said condition, the fulfillment of which discharged the agreement to arbitrate. A motion by the architect for a compulsory arbitration under the statute denied upon the ground that his right thereto had lapsed as provided by the contract. Matter of Smith (1922), 119 Misc. 324.

Arbitration agreement not revoked by death of one of parties. Matter of Scott (1922), 234 N. Y. 539, affg. 200 App. Div. 599, 193 N. Y. Supp. 403.

§ 5. Stay of proceedings brought in violation of an arbitration agreement or submission.

Application. The provision of this section that "if any suit or proceeding be brought" its progress shall be stayed is given full effect when it is limited to suits or proceedings brought thereafter. Matter of Berkovitz v. Arbib & Houlberg (1921), 230 N. Y. 261, 130 N. E. 288, revg. 193 App. Div. 523, 183 N. Y. Supp. 304.

The provision for a stay where there is an arbitration clause, merely provides a remedy for the party who desires to enforce the arbitration agreement and seeks relief from an action improperly brought in violation of its terms and conditions. It was not intended to help or assist a party who had intentionally waived and abandoned the arbitration agreement and had chosen another remedy provided by law. Matter of Zimmerman v. Cohen (1923), 236 N. Y. 15, revg. 204 App. Div. 375.