Contract Abandonment May Automatically Rescind an Agreement to Arbitrate

Bernhard Law Firm examines how parties to a contract may abandon that contract through subsequent acts inconsistent with an intent to enforce, particularly as regards arbitration covenants therein. Bernhard Law Firm

Should you face a contract dispute or claim of contract abandonment, please contact Bernhard Law Firm at 786-871-3349, abernhard@bernhardlawfirm.com, www.bernhardlawfirm.com.

Abandonment of Contract and Arbitration

It is well established in Florida law that abandonment of a contract is a renunciation of the contract, and that neither party can thereafter request specific performance of the abandoned contract’s provisions. Maruri v. Maruri, 582 So. 2d 116, 117 (Fla. 3d DCA 1991) (holding that parties abandoned contract when one party failed to pay and other party acted in acquiescence); Gustafson v. Jensen, 515 So. 2d 1298, 1301 (Fla. 3d DCA 1987) (once abandoned, a contract “may not be specifically enforced”); Plant v. Plant, 320 So. 2d 455, 457 (Fla. 3d DCA 1975 (holding party abandoned contract by failing to obtain insurance policy for benefit of other party as required by the contract); Sinclair Refining Co. v. Butler, 172 So. 2d 499, 502 (Fla. 3d DCA 1965) (holding the parties’ course of conduct, notwithstanding the written covenants in their agreements, evidenced that they abandoned the covenants [of indemnity]).

"Warsaw Negotiation Round Senate of Poland 2014 01" by Michał Józefaciuk - Senat Rzeczypospolitej Polskiej. Licensed under CC BY-SA 3.0 pl via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Warsaw_Negotiation_Round_Senate_of_Poland_2014_01.JPG#mediaviewer/File:Warsaw_Negotiation_Round_Senate_of_Poland_2014_01.JPG
“Warsaw Negotiation Round Senate of Poland 2014 01” by Michał Józefaciuk – Senat Rzeczypospolitej Polskiej. Licensed under CC BY-SA 3.0 pl via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Warsaw_Negotiation_Round_Senate_of_Poland_2014_01.JPG#mediaviewer/File:Warsaw_Negotiation_Round_Senate_of_Poland_2014_01.JPG

Abandonment of a contract may be effected by the acts of one of the parties thereto, where the acts of that party are inconsistent with the existence of the contract and are acquiesced in by the other party—this is tantamount to a rescission of the contract by mutual consent. Maruri, 582 So. 2d at 117; see also Painter, 823 So. 2d 268, 270 (Fla. 2d DCA 2002) (holding that the facts established abandonment of the contract where one party failed to pay and the other party acquiesced to declare the contract void); McMullen v. McMullen, 185 So. 2d 191, 193 (Fla. 2d DCA 1966) (holding parties abandoned contract for joint ownership of property where on party later re-conveyed property at profit and other party acquiesced). Florida courts have held that arbitration agreements are likewise subject to abandonment. See, e.g. Dean Witter Reynolds, Inc. v. Fleury, 138 F.3d 1339, 1342 (11th Cir. 1998) (citing McMullen, 185 So. 2d at 193). Abandonment is similar to discharge by material breach, in which a party to a contract is not entitled to specific performance where that party did not perform it obligations under the clear terms of the contract or a material breach by one party may be considered a discharge of the other party’s obligations thereunder. See Nacoochee Corp. v. Pickett, 948 So. 2d 26, 30 (Fla. 1st DCA 2006) (citing Rose Printing Co. v. Haggerty, 584 So. 2d 606 (Fla. 1st DCA 1991)).

Abandonment Compared to Waiver

We note the distinction between an abandonment reflecting that no valid agreement exists, and a waiver of a contractual right. See, e.g., Strominger v. AmSouth Bank, 991 So. 2d 1030, 1035 (Fla. 2d DCA 2008) (holding a party waived its right to arbitrate by actively participating in litigation); Klosters Rederi A/S v. Arison Shipping Co., 280 So. 2d 678, 681 (Fla. 1973) (holding party not entitled to enforce arbitration under contract based on conduct subsequent request for arbitration). Florida courts have repeatedly held that a party may waive the contractual right to arbitration if the party has knowledge of the right yet takes actions inconsistent with the right. Breckenridge v. Farber, 640 So. 2d 208, 210 (Fla. 4th DCA 1994). These cases recommend a two-prong analysis of whether (1) a party had knowledge of an existing right to arbitrate, and (2) took acts inconsistent with the right. Id. at 211. However, in analyzing whether the parties mutually abandoned the contract altogether, the Court should merely assess whether the parties engaged in conduct that was inconsistent with the existence of a contract or acquiesced to such treatment. Painter v. Painter, 823 So. 2d 268, 270 (Fla. 2d DCA 2002).

"Treaty of trianon negotiations" by Digitalized by User:Cserlajos - From the film record of the negotiations.. Licensed under Public Domain via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Treaty_of_trianon_negotiations.jpg#mediaviewer/File:Treaty_of_trianon_negotiations.jpg
“Treaty of trianon negotiations” by Digitalized by User:Cserlajos – From the film record of the negotiations.. Licensed under Public Domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Treaty_of_trianon_negotiations.jpg#mediaviewer/File:Treaty_of_trianon_negotiations.jpg

Acts Constituting Abandonment

What constitutes abandonment is a question of fact. Id. In making this factual determination of abandonment, “considerations of judicial economy have no role to play.” Strominger v. AmSouth Bank, 991 So. 2d 1030, 1035 (Fla. 2d DCA 2008) (reversing trial court’s order compelling arbitration where party abandoned its right to arbitration by conduct). A party may prove abandonment of a contract by showing that the acts of one party are inconsistent with the existence of the contract and that the other party acquiesced in those acts. Painter v. Painter, 823 So. 2d 268, 270 (Fla. 2d DCA 2002).

Florida appellate court decisions provide guidance on which factual circumstances suffice to evidence abandonment of a contract. In Maruri v. Maruri, 582 So. 2d 116 (Fla. 3d DCA 1991), the Third District Court of Appeal held that parties had abandoned a contract where one party failed to pay and the other party wrote a letter reflecting a desire to not enforce the contract. 582 So. 2d at 117. In Gustafson v. Jensen, 515 So. 2d 1298, 1301 (Fla. 3d DCA 1987), the Third District held that parties had abandoned a contract where one party tore up a copy he believed to be the original and intended its terms to be of no further force and effect. 515 So. 2d at 1301.

"Abandoned house in White Marsh, Virginia" by Toby Alter - Abandoned House, 1983. Licensed under CC BY 2.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Abandoned_house_in_White_Marsh,_Virginia.jpg#mediaviewer/File:Abandoned_house_in_White_Marsh,_Virginia.jpg
“Abandoned house in White Marsh, Virginia” by Toby Alter – Abandoned House, 1983. Licensed under CC BY 2.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Abandoned_house_in_White_Marsh,_Virginia.jpg#mediaviewer/File:Abandoned_house_in_White_Marsh,_Virginia.jpg

In Rose Printing Co. v. Haggerty, 584 So. 2d 606 (Fla. 1st DCA 1991), the First District Court of Appeal reversed a breach of employment contract judgment on a finding of contract abandonment, where the employee admitted that the contract was not working out and he had stepped down. 584 So. 2d at 608. The Haggerty court held that “[h]is relinquishment of duties in those circumstances resulted in failed consideration and an abandonment of the [contract], assuming it was previously enforceable.” Id. (emphasis added).

In McMullen v. McMullen, 185 So. 2d 191 (Fla. 2d DCA 1966), the Second District Court of Appeal held that parties mutually abandoned a contract to jointly hold property where, shortly after contracting, one party insisted on reconveyance of the property, the other party joined in the reconveyance and acquiesced to the benefits of that reconveyance. 185 So. 2d at 193. The McMullen court found that these acts were inconsistent with the purposes of the original contract for joint ownership and evidenced a desire to abandon the terms of the contract, made mutual upon acquiescence. Id. Likewise, in Painter, 823 So. 2d 268, the Second District held the following facts were consonant with a mutual abandonment of an alleged contract: one party failed to pay the amount promised in contract, the other party issued a letter with statements reflecting acquiescence to non-enforcement of the contract, and the parties later continued to make offers and counteroffers, and attempts to negotiate, over the same subject matter. Painter, 823 So. 2d at 270; cf. Posik v. Layton, 695 So. 2d 759, 762 (Fla. 5th DCA 1997) (stating that the fact that one party continuously urged the other party to comply with the terms of a contract demonstrated that the contract had not been abandoned).

Contract parties should take care not to invoke abandonment through these or similar acts after execution. Should you face arbitration or claims of contract abandonment, please contact Bernhard Law Firm at 786-871-3349, abernhard@bernhardlawfirm.com, www.bernhardlawfirm.com.

Read more on contract waiver, release, and abandonment here: https://fraudlawyersflorida.com/2017/10/11/waiver-release-and-abandonment-whats-the-difference-in-florida-law/

Read more on contract reformation here: https://fraudlawyersflorida.com/2017/09/29/how-to-reform-real-estate-contracts-with-good-reason/

Read more on demanding contract performance here: https://fraudlawyersflorida.com/2016/10/26/can-a-real-estate-seller-demand-performance-from-a-defaulting-buyer-florida-law-says-yes/

Bernhard Law Firm PLLC - www.bernhardlawfirm.com
Bernhard Law Firm PLLC – http://www.bernhardlawfirm.com
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