Generally, to be valid and enforceable, a contract must be signed by all parties. But recently, the Eighth Appellate District Court enforced the arbitration provision of a contract that was signed by only one party, demonstrating that a valid contract may form even if all parties have not signed the document.
In Jatsek Constr. Co. v. Burton Scot Contrs., LLC, 2012 Ohio App. LEXIS 3489, a subcontractor on a public improvement project claimed that it had performed work pursuant to a subcontract agreement with the general contractor but had not been paid for the work. The general contractor admitted that the subcontractor had performed work and had not been paid, but argued that the subcontract agreement required arbitration of the dispute instead of a lawsuit in court. The subcontract agreement had handwritten changes made by the subcontractor, but none were made to the arbitration provision. The subcontract agreement had been signed and dated by the subcontractor but not by the general contractor. The trial court held that no contract existed and the defendant general contractor appealed.
On appeal, the subcontractor argued that no contract was formed since the general contractor did not sign the subcontract agreement and, therefore, arbitration was not required. The subcontractor also argued that even if a contract had formed, it was against public policy to enforce the arbitration provision because the lawsuit had already begun.
The appeals court, citing earlier case law, held that where all parties do not sign a proposed contract but one party still performs the work, an implied contract forms under the terms of that proposal. In addition, both parties are considered to have agreed to the contract. Because both parties agreed that the subcontractor had performed the work, the court held that a contract existed between the subcontractor and the general contractor. Because the general contractor had raised the issue of the arbitration agreement early on in the lawsuit, the court stated that enforcing the arbitration provision was not against public policy, even though the lawsuit had already begun. The court also noted that resolving disputes using arbitration is generally favored by the law. Thus, the court held that the parties must arbitrate the dispute under the terms of the contract.
