Opinion ID: 1495908
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Heading Rank: 2

Heading: Arbitration Provision as Plea in Bar.

Text: While favoring arbitration as a means of settling disputes, the courts have been confronted with the practical problem of how to make arbitration effective where one of the parties refuses to abide by and perform an award or decision by an arbitrator or refuses to submit to arbitration some matter within the arbitration agreement. Where an award has been made and the matter is how to make it effective, the law in the federal courts is as follows: Where there is national or state legislation providing for legal enforcement of an award, that will be done on the principle that such governs the remedy to enforce a recognized right. Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 44 S. Ct. 274, 68 L. Ed. 582. Where there is no such statute, the award will be given effect in any appropriate proceeding at law, or in equity. Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 121, 44 S. Ct. 274, 276, 68 L. Ed. 582, and see Bayne v. Morris, 1 Wall. 97, 17 L. Ed. 495; Burchell v. Marsh, 17 How. 344, 15 L. Ed. 96; Karthaus v. Ferrer, 1 Pet. 222, 7 L. Ed. 121; Davy v. Faw, 7 Cranch, 171, 3 L. Ed. 305. Where the arbitration agreement is executory, specific performance to compel arbitration has been denied. Red Cross Line v. Atlantic Fruit Co., supra, pages 120, 121 of 264 U. S., 44 S. Ct. 274. Such a breach will support an action for damages (Id., page 121 of 264 U. S., 44 S. Ct. 274, 276) and may be pleaded in bar where the arbitration was confined to furnishing essential evidence of specific facts and such form of evidence is a condition precedent to suit (Red Cross Line v. Atlantic Fruit Co., supra, page 121 of 264 U. S., 44 S. Ct. 274, and the cases above cited from the Supreme Court and this court upholding validity of arbitration provisions in construction contracts). Here the refusal to arbitrate is pleaded by the defendants both in bar and as a counterclaim. The plea is that there were disputes as to certain work estimates (which involved the character of the material handled) and as to the alteration of the line ordered by the engineer being such as materially changed the character of the work. Whatever may be said as to the controversy concerning the estimates, the contract expressly provided that, where an alteration by the engineer materially changed the character of the work, the parties should agree in writing as to the reduced or increased compensation therefor before the commencement of the work covered thereby. Obviously, the agreement was that the compensation for the work on the changed part of the line was an express condition precedent to doing such work and where the parties could not agree as to such matter it is equally clear that a determination thereof by the prescribed method of arbitration was a condition precedent to going ahead therewith. It is also clear that this construction contract was a unit covering all of the work provided for therein. This situation where the arbitration relates to a dispute in a matter which the contract expressly provides shall be determined before the work is done seems to us to be a stronger one than where the arbitration is merely a condition precedent to bringing suit. When appellee refused performance by rejecting arbitration of this matter, it declined to perform a condition precedent to the further doing of the work by appellants. It placed appellants in the position where they had to choose between continuance of the work with a suit for damages at the end for this breach, waiver of the breach, or cessation of the work. They chose the last and were acting within their rights (see Choctaw & M. R. Co. v. Newton, 140 F. 225, 248, this court)  they did not lose their right to damages because they declined to proceed after this breach by appellee of this condition precedent (Choctaw & M. R. Co. v. Newton, 140 F. 225, 248, this court; The Eliza Lines, 199 U. S. 119, 128, 26 S. Ct. 8, 50 L. Ed. 115, 4 Ann. Cas. 406; Anvil Mining Co. v. Humble, 153 U. S. 540, 551, 552, 14 S. Ct. 876, 38 L. Ed. 814; Hinckley v. Pittsburgh B. Steel Co., 121 U. S. 264, 7 S. Ct. 875, 30 L. Ed. 967; Lovell v. St. Louis Mutual L. Ins. Co., 111 U. S. 264, 274, 4 S. Ct. 390, 28 L. Ed. 423; United States v. Behan, 110 U. S. 338, 344, 4 S. Ct. 81, 28 L. Ed. 168; Chicago v. Tilley, 103 U. S. 146, 154, 26 L. Ed. 371; Williams v. Bank of United States, 2 Pet. 96, 102, 7 L. Ed. 360; Salmon v. Helena Box Co. (C. C. A.) 158 F. 300, 303; see note to Valente v. Weinberg, 13 L. R. A. (N. S.) 448.