It frequently surprises those involved in business transactions to learn that they may be bound to arbitrate a dispute while never having signed an arbitration agreement. There are a number of circumstances under which such an unexpected arbitration obligation may arise. Some may be avoided (or caused) by artful drafting. Others may result as a matter of law from the facts of the case. Often, this is an issue that is off the radar screen of those charged with counseling their clients in response to the question: “do we arbitrate or do we litigate?”
This chapter will examine the historical context in which this issue arises. It will be seen that while courts strongly favor arbitration, the obligation is still rooted in contract. Consequently, a party cannot ordinarily be compelled against its will to arbitrate a dispute that it has not agreed to submit to arbitration. Nonetheless, an obligation to arbitrate does not attach only to one who has signed an arbitration agreement. On the contrary, a non-signatory may be bound to arbitrate if that result is dictated by ordinary principles of contract and agency law. Finally, it will be demonstrated that based on such common law principles, there are at least five legal theories that have been recognized by the courts under which non-signatories may be bound to arbitration agreements.