Undocumented Oral Agreement Came Within Scope of Written Arbitration Clause

A hauling company submitted bids for removal of three different types of construction debris, and the parties agreed on and signed a contract covering two of those categories. Later, by oral agreement the third category initially bid on was added at a different price, but this agreement was never reflected in any written amendment or change order.

The original bid was for (1) concrete excavation and haul off, (2) brick haul-off, and (3) construction and demolition ("C&D") haul-off. The parties signed a contract for the first two which included an arbitration clause. They later reached an oral agreement for C&D disposal at a lower price than originally quoted.

When a dispute arose, the prime contractor, Griffin, sought arbitration per the signed contract, including a dispute on the C&D disposal. The hauling company, Southwinds, objected to the arbitrator’s jurisdiction to hear the C&D dispute. The arbitrator ruled that she had such jurisdiction, finding that the C&D price was a modification to an existing contract containing an arbitration clause. She later ruled against Southwinds, who appealed. Distilled to its essence: was the C&D agreement a modification to an existing contract, or was it a new agreement?

The appellate court stated, first, that the issue of arbitrability was one for the courts, and not for the arbitrator. Looking then to the arbitration clause, the appellate court noted:

the Subcontractor Agreement's broad arbitration provision covered "a claim by [Southwinds] against [Griffin]" and "a claim [filed by Griffin] against [Southwinds]." The parties did not limit the arbitration provision's scope to claims arising out of the Subcontractor Agreement or to claims related to the Subcontractor Agreement. The parties placed no limitation on the nature of the claims between them that fell within the arbitration provision ... The C&D haul-off claims involved the same construction project and the same essential type of work being performed; they differed only in the type of debris removed. Accordingly, we conclude the C&D haul-off claims had a significant relationship to, and were factually intertwined with, the Subcontractor Agreement.

Thus, those claims were subject to arbitration, and the arbitrator’s award was confirmed. The case is Southwinds Express Constr., LLC v. D.H. Griffin of Tex., Inc., 2016 Tex. App. LEXIS 12217 (14th Ct. of App., Nov. 15, 2016).