## Facts

- Becker Autoradio U.S.A., Inc., a Pennsylvania corporation, served as the exclusive U.S. distributor of Becker automobile radios and accessories manufactured by Becker Autoradiowerk GmbH, a West German company.
- The parties executed a written exclusive distribution agreement on July 1, 1974, granting Becker U.S.A. exclusive selling rights in the United States and setting an expiration date of June 30, 1976.
- The agreement contained a broad arbitration clause covering all disputes arising “out of and about” the agreement.
- The agreement contemplated that any continuation beyond June 30, 1976 would be subject to negotiations no later than six months before expiration.
- The parties discussed an extension but did not execute a signed written extension.
- Becker U.S.A. alleged that before the expiration date the manufacturer orally promised a five-year extension conditioned on Becker U.S.A.’s satisfaction of specified requirements, largely tied to the existing distribution relationship.
- Becker U.S.A. asserted it met the conditions and that the manufacturer nonetheless refused to honor the oral extension, leading to claims for breach and related relief.

## Issues

1. Whether a dispute over an alleged oral extension that purportedly carried forward the terms of the written distribution agreement, including its arbitration clause, falls within the scope of the written arbitration clause.
2. Whether the court or the arbitrator decides questions concerning the existence and breach of the alleged oral extension when the parties indisputably agreed to a broad arbitration clause in the written contract.

## Decision

- The Third Circuit reversed the district court’s denial of a stay and motion to compel arbitration.
- The court held the dispute regarding the alleged oral extension was within the scope of the written arbitration clause.
- The court directed that disputes concerning the alleged oral extension, including whether it was formed and whether it was breached, be decided in arbitration.

## Legal Principles

- Under federal arbitration law, doubts about the scope of arbitrable issues are resolved in favor of arbitration, particularly when the arbitration clause is broad.
- An arbitration clause covering disputes arising “out of and about” an agreement is construed broadly to include disputes substantially related to the contractual relationship.
- When an alleged oral extension is presented as a continuation of the same agreement—carrying forward the same substantive terms and arbitration mechanism—controversies about the extension’s existence and breach are treated as disputes arising from the original agreement and are for the arbitrator to decide.
- A court should not deny arbitration by characterizing an extension dispute as outside the original contract when the alleged extension is functionally tied to the original agreement’s subject matter and dispute-resolution provision.

## Conclusion

The Third Circuit required arbitration because the alleged oral extension was closely connected to the written distribution agreement and its broad arbitration clause, making formation and breach disputes over the extension questions for the arbitrator rather than the court.


Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3d Cir. 1978)