In Beck v Park W Galleries, Inc, 499 Mich 40; 878 NW2d 804 (2016) the Michigan Supreme Court held that arbitration clauses in purchase contracts did not apply to previous transactions between the same parties for the sale of artwork.
The plaintiff’s in Beck purchased unique pieces of art on different cruise ships in various international waters over the course of several years. As part of each sale, the defendant provided a certificate of authentication and a written appraisal. All purchases were also accompanied by a signed invoice under which the parties agreed to the terms of the transaction. By 2007, the invoices contained an agreement to arbitrate all claims concerning the transaction.
Several years after purchasing the artwork, the plaintiff’s discovered that the art purchased from defendant Park West was not actually worth the represented value and that some of the art was forged. As a result, the plaintiff’s filed suit against the defendants asserting claims of breach of contract, breach of warranty of fitness, fraud, conspiracy, violation of the sales of fine art act, violation of the Art Multiple sales act and violation of the Michigan Consumer Protection act, among other claims.
The trial court subsequently granted defendants’ motion for summary disposition finding that most of the plaintiff’s claims were barred by the arbitration clauses contained in the later invoices. The trial court also found that the arbitration clause found in the later invoices did not extend to transactions with invoices that did not contain an arbitration clause. Both parties filed appeals to the Michigan Court of Appeals.
The Court of Appeals reversed the trial court in part, holding that the arbitration clause in invoices for the later-executed transactions extended to prior transactions for which the invoices did not contain the arbitration clause. The plaintiff’s then filed an application for leave to appeal to the Michigan Supreme Court.
After granting leave to appeal in part, the Michigan Supreme Court reversed the Court of Appeals holding that an arbitration clause in purchase contracts did not apply to previous transactions between the same parties for the sale of artwork. In reaching its holding the Court stated that the Court’s primary task when construing a contract is to give effect to the parties’ intentions at the time they entered into the contract, which requires an examination of the contract according to its plain and ordinary meaning. Further, Michigan law requires that separate contracts be treated separately and that a general policy favoring arbitration cannot trump the actual intent and agreement of the parties. Therefore, the inclusion of the arbitration clause in the later contracts did not provide notice to the plaintiffs that the clause was to apply to all previous contracts between the parties. As a result, the only claims subject to arbitration were those arising from invoice agreements specifically containing an arbitration clause.
As indicated above, it is important to thoroughly review and understand contract provisions prior to executing an agreement.
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