Tag Archives: contracts

Contractual Arbitration Clauses Can’t Supersede Arbitration Statute

By on March 9, 2016

Arbitration clauses for dispute resolution are a common component of all manner of contracts. While the pros and cons of arbitrating in lieu of litigating are hotly debated, the finality of arbitrators’ decisions is often cited favorably. A reduced chance of future appeals generally keeps costs down.

That finality can prove to be a bit too harsh, for some. Massachusetts courts have consistently refused to vacate arbitration awards even for errors of law or fact. In an effort to minimize the probability of such a result, the parties negotiating a certain arbitration clause included language addressing it. The clause stated, in part, that a judge could overturn the award in the event of an arbitrator’s “material, gross and flagrant error.”

As luck would have it, the parties ended up taking various disputes to arbitration. Not surprisingly, the losing party sought relief it court for what it argued, among other things, was such an arbitrator’s error.

This week the Supreme Judicial Court of Massachusetts issued a decision, Katz, Nannis & Solomon, P.C., & Others v. Bruce C. Levine & Another, in which it denied that request for relief.

The court reasoned that the state statute governing arbitrations, M.G.L. 251, does not allow for alteration of the standards for judicial review. Specifically, Section 11 mandates “the court shall confirm an award” except in the specific situations listed in other sections of the statute. Katz, citing M.G.L. c. 251, s. 11.  Since the language in the parties’ arbitration clause differed from the limited statutory exceptions, the court refused to apply it.

Contracting parties in Massachusetts should use caution in selecting the right arbitrators. Arbitrators’ mistakes can still be binding, even when all parties agree they should not be.

Do You Have a Contract You Can Lien On?

By on July 21, 2015

To file a mechanic’s lien in Massachusetts, a contractor must have a written contract with the property owner (or owner’s authorized agent).  Subcontractors and material suppliers must show that written contracts exist for their labor and materials as well.  Although this may seem like a rather simple requirement, in some instances whether a written contract exists is not entirely clear.

In 1996, the legislature amended Mass. Gen. Laws c. 254 (the mechanic’s lien statute) to define “written contract” as “any written contract enforceable under the commonwealth.” This means courts can rely on standard contract law to determine whether a written contract is sufficient for a mechanic’s lien.  Taking into account the new amendment, the appellate court in Harris v. Moynihan Lumber of Beverly, Inc., concluded that a memorandum or writing sufficient to satisfy the Massachusetts statute of frauds should also meet the requirement of a written contract for purposes of the statute. The statute of frauds requires a writing “signed by the party to be charged,” in the event that a contract cannot be performed in less than one year’s time. The requirements of the statute of frauds are less stringent than the pre-1996 standard of “an entire and continuing arrangement in writing.”

On many occasions since 1996, Massachusetts courts addressed the question of what constitutes a written contract for purposes of establishing a valid mechanic’s lien.  While the cases have led to disparate results, several rules have emerged.  First, in order for a contract to be enforceable, the terms need not all appear on the same document.  Taken together, however, the series of writings must contain the essential terms of a contract, such as price, quantity, time of performance, and type of material or services.  Noreastco Door & Millwork, Inc. v. Vahradahatu of Massachusetts, Inc. (finding that a one-page cover sheet “original proposal” and a one-page reply memorandum did not constitute a contract for the purposes of the mechanic’s lien statute).  The purpose of this requirement is to ensure project owners have adequate notice of contract terms, so they may make informed choices to protect their interests.  Second, at least one of the documents being used as evidence of a contract must be signed by the party against whom the contract is being enforced (note that e-mail acceptance may be sufficient for a signature).  Third, the connection between the papers may be established by oral evidence, which, taken together with the content of the documents, shows the intent of the parties was to form a contract.  In Moynihan Lumber, Inc., the court found that a series of documents including a sales contract, credit application, and price quotations taken together constituted a contract for mechanic’s lien purposes.  In contrast, that same year the court in Nat’l Lumber Co. v. Fort Realty Corp., found no sufficient written contract because the documents lacked information on the price and quantity of the supplies, which is necessary information for owners to possess in order to protect their interests.  In Scituate Ray Precast Concrete Corp. v. Intoccia Const. Co. Inc., however, a series of signed delivery tickets and their corresponding invoices satisfied the statute of frauds and met the requirements of the mechanic’s lien statute, provided that the person signing for the deliveries was authorized to do so.

The best case scenario is for all parties to sign a single document with clear terms. The realities of the construction industry frequently do not allow that luxury.  When a fully signed contract with containing all the necessary terms hasn’t been executed, it is important to consult with a Massachusetts construction attorney to determine whether the documents you have are sufficient to support your mechanic’s lien.