Archive for July 2011

No Arbitration Agreement Where Multiple “Contracts” Created Ambiguity

July 25, 2011

In January, the Illinois Appellate Court found that where two design firms executed both a “proposal” and then a contract with only one referencing an arbitration agreement, it was unclear which agreement governed and therefore unclear whether there was an agreement to arbitrate.  The intent of the parties in their multiple contracts was ambiguous.  Consequently, both documents could not be reconciled on the issues as to the arbitration requirement.

In A. Epstein & Sons Int’l, Inc. v. Eppstein Uhen Architects, Inc., Franciscan Communities, d/b/a St. Joseph Home of Chicago, hired defendant Eppstein Uhen Architects Inc. (EUA) to provide professional design services for a construction project in Chicago, Illinois.  EUA then asked plaintiff A. Epstein & Sons International Inc. (Epstein) to submit a proposal to help provide engineering design services for the St. Joseph’s construction project.  Dissatisfied with the performance on the project, St. Joseph Home of Chicago filed an arbitration demand against EUA in December 2007, which in turn led EUA to file an arbitration demand upon Epstein.

In May 2008, Epstein filed a petition to stay arbitration and for partial summary judgment. Epstein attached two documents to its petition:  (1) “MEPFP Engineering Services Proposal” dated November 6, 2002 “November Document,” and (2) “Architect-Consultant Agreement” dated December 9, 2002 “December Document”.  The November Document described the services Epstein planned to provide as well as project fees and expenses.  The December Document included a fixed fee of $275,000 for Epstein’s services as well as billing and insurance provisions.  The December Document also referenced an AIA provision: an unattached document that required disputes to be settled by arbitration.  Despite Epstein’s claims that the December Document was invalid due to a lack of consideration, the court denied Epstein’s motion for partial summary judgment.  The court reasoned that the November Document appeared to be a mere proposal between the parties, and that the December Document’s language was clear and unambiguous.

On appeal, contrary to the trial court’s ruling, EUA argued that the November Document was not a mere proposal, but instead it was an actual agreement between the parties.  This discrepancy concerned the appellate court and speculated that the circuit court may have ruled differently had the court known the November Document was an agreement between parties as opposed to a proposal.  EUA maintained that the December Document modified the November Agreement, whereas Epstein argued the December Document was a formality to insure proper payment.  The court found the parties’ intent for the documents ambiguous.   The appellate court held summary judgment was improper because of the discrepancy of terms in the November Document, and the need for extrinsic evidence to determine the intent of the parties.  Summary judgment was also inappropriate because the November Document raised fact issues that needed to be addressed at trial.  The judgment of the circuit court of Cook County was affirmed in part and reversed in part; cause remanded.

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