Arbitration: When “May” Means “Shall”

• Posted on: Jun 30 2025

By: Jeffrey M. Haber

In today’s article, we discuss how courts interpret arbitration clauses in contracts by focusing on Perle Tech. Inc. v. United Apollo Intl. Inc., a case recently decided in Supreme Court, Kings County. Despite the use of the word “may” in the arbitration clause, the court held that arbitration was mandatory, not permissive, due to other contract provisions indicating clear intent to arbitrate. The decision underscores the point that under New York law, contracts must be interpreted based on the parties’ intent as expressed in the agreement. As such, courts look to harmonize seemingly conflicting terms and enforce agreements according to their plain meaning, favoring interpretations that give effect to all provisions.

“It has long been the rule in this State that the parties to a commercial transaction ‘will not be held to have chosen arbitration as the forum for the resolution of their disputes in the absence of an express, unequivocal agreement to that effect; absent such an explicit commitment neither party may be compelled to arbitrate.’”[1] “The reason for this requirement, quite simply, is that by agreeing to arbitrate a party waives in large part many of his normal rights under the procedural and substantive law of the State, and it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent.”[2] Accordingly, an arbitration agreement “must be clear, explicit and unequivocal and must not depend upon implication or subtlety.”[3]

Sometimes, an agreement to arbitrate may have language that seemingly conflicts – that is, it contains language that appears to be less than clear, explicit and unequivocal. In those situations, traditional rules of contract interpretation apply. That was the case in Perle Tech. Inc. v. United Apollo Intl. Inc., 2025 N.Y. Slip Op. 32188(U) (Sup. Ct., Kings County June 10, 2025) (here).

Perle involved an agreement for the purchase and sale of nitrile powder free blue examination gloves (“Purchase Agreement”). Plaintiff claimed that it paid a deposit of $583,000, but the gloves were never delivered, leading to the contract being terminated. Defendants returned only $531,000 of the deposit. Plaintiff commenced the action seeking the balance of $52,000 and post-judgment interest at the statutory rate of 9%.

Plaintiff moved for summary judgment in lieu of complaint. Defendants opposed the motion, claiming, among other things, that the dispute should be arbitrated pursuant to the terms of the Purchase Agreement.

The Purchase Agreement contained a section, titled “Governing Law and Dispute Resolution,” in which the parties agreed that they would settle their disputes and differences that arose from or in connection with the agreement “by means of negotiations and consultations”. In the event such “negotiations and consultations” did not result in an agreement “within three (3) days from when the Dispute arose, any party may submit the Dispute for consideration and final settlement to the American Arbitration Association (AAA).”

In another part of the Purchase Agreement, the parties agreed that the arbitration clause did “not preclude any Party from bringing an action in any court of competent jurisdiction in the state of Florida for injunction relief in relation to the breach or the threatened breach of any of the terms of the Contract by the other Party.”

Plaintiff argued that arbitration was not required for two reasons: (1) the reference to arbitration in the Purchase Agreement was permissive and not mandatory; and (2) the agreement contained references to courts and judicial remedies, rendering the arbitration clause ambiguous and unenforceable.

The court held that reading the Purchase Agreement in its totality, it was clear the parties intended to arbitrate any disputes arising out of the Purchase Agreement.[4] The court explained that “[w]hile [the word] ‘may’ [could] be construed as implying that arbitration is optional, there [were] other provisions in the Purchase Agreement that remove[d] any ambiguity” about whether the parties intended to arbitrate their disputes.[5]

First, said the court, “Section 13.3 of the Purchase Agreement states that ‘arbitration shall be final and binding on the Parties.’”[6] Second, said the court, “Section 13.4 provides that any court action [was] limited solely to seeking injunctive relief in the State of Florida.”[7] Thus, explained the court, the Purchase Agreement only provided for the filing of a court action for injunctive relief.[8] Since plaintiff was “seeking to recover monies allegedly owed by Defendants” and did “not seek any injunctive relief,” arbitration was held to be the proper forum for the dispute to be resolved.[9] Accordingly, the court directed the parties “to proceed to arbitration in accordance with the terms of the Purchase Agreement.”[10]

Takeaway

Under New York law, written agreements are construed in accordance with the parties’ intent. “The best evidence of what parties to a written agreement intend is what they say in their writing.”[11] As such, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” “Courts may not ‘by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.’”[12]

“‘Whether an agreement is ambiguous is a question of law for the courts … Ambiguity is determined by looking within the four corners of the document, not to outside sources.’”[13] “The entire contract must be reviewed and ‘[p]articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought.’”[14] “Where the language chosen by the parties has ‘a definite and precise meaning,’ there is no ambiguity.”[15]

Further, in interpreting a contract, a court should favor an interpretation that gives effect to all the terms of an agreement rather than ignoring terms or interpreting them unreasonably.[16] Therefore, “where two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect.”[17]

Perle is a good example of the foregoing rules of contract interpretation in application. It highlights the point that under New York law, courts seek to harmonize conflicting terms and interpret contracts based on clear, expressed intent, favoring interpretations that give meaning to all provisions without adding or omitting language.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] Marlene Indus. Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 333 (1978) (citations omitted).

[2] Id. at 333-334.

[3] Waldron v. Goddess, 61 N.Y.2d 181, 183–84 (1984) (internal citations omitted).

[4] Slip Op. at *3.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Greenfield v. Philles Records, 98 N.Y2d 562, 569 (2002) (internal quotation marks and citation omitted).

[12] Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398, 404 (2009) (quoting Reiss v. Financial Performance Corp., 97 N.Y.2d 195, 199 (2001)).

[13] Id. at 404 (quoting Kass v. Kass, 91 N.Y.2d 554, 566 (1998)).

[14] Id. at 404 (quoting Atwater & Co. v. Panama R.R. Co., 246 N.Y. 519, 524 (1927)).

[15] Id. at 404 (quoting Greenfield, 98 N.Y.2d at 569).

[16] See, e.g., Perlbinder v. Board of Mgrs. of 411 E. 53rd St. Condominium, 65 A.D.3d 985, 986-987 (1st Dept. 2009).

[17] Id. at 987; see also Lenart Realty Corp. v. Petroleum Tank Cleaners, Ltd., 116 A.D.3d 536, 537 (1st Dept. 2014).