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What words must be in a contract between a homeowner and a builder as far as binding arbitration is concerned?

Poway, CA |
Filed under: Arbitration

Do they have to let you know that you have a right to a trial instead?

Attorney Answers 5

Posted

This is the minimum language required by law for a home improvement contract:
"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE BUSINESS AND PROFESSIONS CODE OR OTHER APPLICABLE LAWS. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY." "WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION."

Additional language is allowed to be included, but if this language is not included, then the clause is void and unenforceable.

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1 comment

Michael Charles Doland

Michael Charles Doland

Posted

Great answer!

Posted

You are leaving out a lot of facts. It appears you have already signed an agreement. No one has to tell you about your right to go to court. Not having a construction/real estate lawyer review your agreement on a medium - large (and maybe even modest) project is an invitation to difficulties down the road. Contractors normally use standard form, pre-printed agreements designed to favor contractors.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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Posted

If your contract provides that disputes must be resolved by binding arbitration, it likely will be enforced by the court if it comes to that. There aren't that many loopholes when it comes to wiggling out of an arbitration clause.

I routinely advise my clients--including contractors and design professionals as well as property owners who need their services--to cross off any arbitration clauses in their construction contracts, especially binding arbitration clauses. Why give up your right to a jury trial and an appeal if you need it, and pay for the arbitrator (or maybe three of them) and the arbitration room, as well as your attorney, when neither the law nor the rules of evidence need to be followed in the arbitration, and you are stuck with the result, win or lose?

Your taxes already paid for the judge and the courtroom, and the jury and judge are likely to give you a fair shake at trial. If they don't, a higher court can step in and correct it, in the right circs.

If it's not too late for you, think hard before signing an agreement with an arbitration clause.

Good luck.

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Posted

Dear Contracting Party: Examine your contract under the "Disputes" section or heading (if that exists). If your contract is silent on the subject of ADR (mediation or arbitration) then the two parties would have to "stipulate" (or separately agree) to have their disputes handled via arbitration. Instead, the parties will be forced to litigate. Depending upon the nature and extent of your dispute, mediation or arbitration may be a GOOD route to resolution (and, a better route than litigation). My experience is that neither litigation nor arbitration is necessarily the most efficient route to resolution; instead, try direct communication between the parties in a neutral setting, perhaps with an experienced mediator who is experienced in the law and construction (as I am), which would be far less expensive than protracted litigation or arbitration. Best wishes and good luck. James Greer

JAMES GREER is an attorney with offices in Del Mar CA and Boulder CO, practicing in the areas of Real Estate, Business, Construction Law (858.481.9006) (jamesgreer@CalCoLaw.com) Please understand, by way of disclaimer, that any response provided to your AVVO question does not mature into an attorney-client relationship and you are always advised to seek out a local attorney so that all of your information can be conveyed and responded to appropriately.

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Posted

In AT&T Mobility v. Concepcion, No. 09-893, the U.S. Supreme Court validated consumer contracts with arbitration clauses containing class action waivers. This decision may cause companies that do not have arbitration provisions in their consumer contracts to add them in order to limit or avoid class actions.

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