Construction Law News Blog

Is Your Arbitration Clause Enforceable?

   A recent court-of-appeals decision nicely summarizes the enforceability of arbitration clauses. In Crouse v. LaGrange Junction, Ltd., 2012 Ohio 2972 (June 29, 2012 9th Dist.) a homeowner sued a builder when a number of problems prevented legal occupation of a house. The home builder / defendant moved to stay the litigation pursuant to Ohio Revised Code section 2711.02, citing an arbitration clause in a construction contract.  The trial court denied the motion to stay, agreeing with the homeowner that the arbitration clause was unenforceable due to substantive and procedural unconscionability.

   First, the Court of Appeals confirmed that the denial of a motion for stay is immediately appealable (even when the order makes not determination pursuant to Civil Rule 54(B)). Next, the Court recognized that unconscionability is a valid basis for revoking a contract. But, the agreement must be both (1) procedurally and (2) substantively unconscionable.

    The test for procedural unconscionability involves consideration of several factors and the totality of the circumstances:

       * relative bargaining power of the parties; 
       * representation by legal counsel when the contract was   
          negotiated and/or executed; 
      * age, education, intelligence, business acumen and experience in 
        similar transactions; 
      * whether alterations of the printed terms were possible 
        (take it or leave it!); 
      * whether there were alternative sources of supply for the 
        goods in question.

   The Court held that the record did not contain enough evidence to support the trial court’s conclusion that the arbitration clause was procedurally unconscionable. IE: Evidence of the factors considered. Accordingly, the case was reversed and remanded.

 

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Attorney Spotlight

C. Michael Shull, III focuses his practice on construction law and litigation. Michael's client representations range from casinos and ENR Top 400 contractors to design firms and subcontractors.

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