Ex parte Payne
In Ex parte Payne, 741 So. 2d 398 (Ala. 1999), the Court was faced with facts substantially similar to those presented by the Cobbs' petition. In that case, Payne's application for financing for the purchase of a new car was not approved. Although Payne resisted the dealership's efforts to regain possession of the car, the dealership obtained a writ of seizure, which was executed by the sheriff's department. Payne moved for a hearing on the writ of seizure, filed an answer to the dealership's detinue action, and filed a counterclaim alleging breach of contract, fraud, and deceit.
In Payne, the trial court granted the dealership's motion to compel arbitration pursuant to an arbitration provision in the "Retail Purchase Order" executed by the parties. Payne sought a writ of mandamus directing the trial court to vacate the order compelling arbitration of her counterclaims against the dealership. We granted the petition, holding, in pertinent part:
"Payne argues that the arbitration provision is unenforceable because [the dealership] denies that it has a binding contract with Payne. We agree.
"Section 2 of the Federal Arbitration Act, 9 U.S.C. 2, provides in pertinent part:
"'A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'
"Thus, federal law mandates the arbitration of claims encompassed by an arbitration clause that is part of a binding contract that involves interstate commerce. See, e.g., AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649, 89 L. Ed. 2d 648, 106 S. Ct. 1415 (1986). Accordingly, in order for [the dealership] to compel arbitration of Payne's counterclaims, the Retail Purchase Order containing the arbitration provision must be a binding contract.
"A contract cannot be formed without an offer, an acceptance, consideration, and mutual assent to terms essential to the contract. See Steiger v. Huntsville City Bd. of Educ., 653 So. 2d 975, 978 (Ala. 1995) .... Paragraph 7 of the Retail Purchase Order provides that Payne's 'offer is not binding upon Dealer until accepted at Dealer's office and signed by a manager of Dealer, (and until the provisions of Paragraph 8 are met if a credit sale).' Paragraph 8 of the Retail Purchase Order provides in pertinent part that 'the Purchaser(s) offer is not accepted and the transaction is not consummated until (a) approved in writing by Dealer and a responsible Bank or Finance Company.' The requirement that a credit sale be approved in writing by a bank or finance company is a condition precedent to the creation of a binding contract.
"'In negotiating a contract the parties may impose any condition precedent, the performance of which is essential before they become bound by the agreement; in other words, there may be a condition precedent to the existence of a contract. Accordingly, where the parties to a proposed contract have agreed that the contract is not to be effective or binding until certain conditions are performed or occur, no binding contract will arise until the conditions specified have occurred or been performed.'
"17A Am. Jur. 2d Contracts 34 (1991). It is undisputed that Payne's credit application was not approved. Thus, the condition precedent did not occur, and, by the express terms of the Retail Purchase Order, no binding contract was created. ... [The dealership] cannot seek to enforce the arbitration provision in the Retail Purchase Order and, at the same time, claim that the Retail Purchase Order is not a binding contract. As this Court has recognized, 'a person cannot merely pick and choose the provisions in a contract that he wants to apply.' Delta Constr. Corp. v. Gooden, 714 So. 2d 975, 981 (Ala. 1998)." (Ex parte Payne, 741 So. 2d at 402-04.)