united-states contract-law new-jersey arbitration
Can an arbitration agreement take on retroactive force?
<p>Suppose Party B signs a one year contract with a binding arbitration agreement to rent commercial space from Party A. As part of the agreement, Party B agrees to pay $2,000 a month rent to Party A (the landlord) and $1 a month for each square foot it occupies to Party C (another company who occupies space in the same building) for its share of utilities.</p>
<p>At this point, Party C has no connection to Party A. They just happen to rent space from Party A in the same building and voluntarily took on the responsibility of paying the utility bill. Every tenant has an agreement with the landlord to pay Party C in proportion to the amount of space it occupies. The agreement, however, was only signed by Party A &amp; B, not by Party C. Party C continues accept money for utilities from Party B.</p>
<p>After several years, Party C acquires ownership of the entire building and Party B wishes to dispute the amount paid for utilities during the first year - either because it turns out that it paid more than $1 per square foot or because it miscalculated the number of square feet it was occupying and should have paid less.</p>
<p>Is the dispute subject to arbitration?</p>
<p>One one hand, Party C did not own the building when it accepted the utility payments from Party B and at that point it did not inherit any of the obligations of the prior owner. On the other hand, now that it acquired the building and inherited the obligations of the prior owner, perhaps as the recipient of the extra utility payment, the arbitration agreement gains retroactive force?</p>

<h2>It’s not a question of retroactively</h2>
<p>When Party C became the principal of the contract, they assumed all the rights and obligations of Party A - including the right/obligation to arbitrate disputes.</p>

<blockquote>
<p>should have paid less. Is the dispute subject to arbitration?</p>
</blockquote>
<p>At the outset, the answer is no, although it ultimately depends on the exact terms of the contract(s).</p>
<p>A change of ownership does not merge C's non-landlord (or &quot;extra-contractual&quot;) capacity with the landlord capacity that C subsequently attained. Nor does a change of ownership automatically modify the scope of the arbitration agreement. Any such modification would have to be provided in the agreement itself or via an agreed amendment.</p>
<p>B's claim against C is in C's non-landlord capacity. For that type of claims, B and C are each entitled to litigate as if no arbitration agreement existed.</p>
