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Third Party Mentioned in Contract Must Arbitrate Dispute Related to Contract
Description Two contracting parties stipulated that they would give a third party some free goods for bringing them together. When they quit giving the third party the goods, he sued for breach of contract. Court held that the third party must arbitrate complaint as the contract required, even though he did not sign the agreement.
Topic Contracts
Key Words Arbitration, Statute of Frauds
C A S E   S U M M A R Y
Facts Chalk and Servenarts agreed to an exclusive license agreement, under which Chalk would cast and sell 30 copies of sculptures by the artist Erte. The contract required arbitration in London in event of dispute. To compensate Borsack for getting them together, they amended their agreement to say that they would give Borsack five copies of each sculpture at no cost. Borsack did not sign any agreements. When they quit giving copies of the sculptures to Borsack, he sued in federal court for breach of contract, contending that his claim was not a part of the license agreement and, therefore, not subject to the arbitration clause. Chalk and Servenarts moved to compel arbitration.
Court Decision Motion to stay litigation pending arbitration granted. [The case is in federal court despite the fact that all parties are New York residents because of the international arbitration clause.] The U.N. Convention on the Recognition and Enforcement of Foreign Arbitrable Awards is understood to mean that parties can be bound by arbitration clauses, even if they did not sign the agreement. Any rights that Borsack may have come from the license agreement, not a separate contract, which the Statute of Frauds would prevent from being contested in any event since the matter could not have been finished within a year. Hence, Borsack takes the other two parties to London for arbitration.
Citation Borsack v. Chalk & Vermilion Fine Arts, Ltd., 974 F.Supp. 293 (S.D.N.Y., 1997)

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