Last week, Oregon's Court of Appeals enforced an arbitration clause in a case where a homebuilder sued the married couple who hired him. We've seen a number of cases and laws involving arbitration recently. In Gemstone Builders, Inc. v. Jeff & Jennifer Stutz, the court emphasized that it will enforce arbitration clauses in contracts, even when the agreement is brief and ambiguous. Although, as discussed below, the outcome may have differed if the lawyers had pursued a different approach in the trial court.
The home-building contract told the parties to submit disputes over "repair or replacement" to arbitration "prior to" a lawsuit. Another part of the contract said "if there is cause for suit, dispute or action" to "enforce any provision" then the parties must arbitrate. Yet another sentence declared that the arbitration decision will be binding. The parties disagreed over (a) whether the contract required some or all claims to be arbitrated and (b) whether the arbitration was binding or just a first step before filing a lawsuit, if one side did not like the outcome.
The builder sued without arbitrating first. He argued that the contract was too indefinite as to the process. However, the court brushed aside that argument, noting the Oregon's Uniform Arbitration Act fills in any gaps. Consequently, the bigger issues were whether the contract covered all claims and was final.
Here's where the lawyering at the trial court level might have made a difference. When a contract is ambiguous, then the court may consider evidence outside of what is written in the contract. However, all the court of appeals had to work with was the language of the contract itself. The parties did not offer any evidence of (1) who wrote the contract or (2) what the parties intended or meant by the words in the contract. For example, if there were evidence that the homebuilder had written the contract, then the ambiguities might have been construed against him. In baseball, a tie goes to the runner. In contract law, an ambiguity is construed against the drafter.
Without any factual evidence to place the contract words in context, the court must decide based upon an established checklist, or rules of construction. Using those rules, the court held the contract required arbitration that was binding on the parties - no second chance in court.
The lesson for people: you are bound by contracts, even if they are not written well. The lesson for attorneys: present evidence and create a record in the trial court.
Jeff Merrick, Oregon Trial Attorney
Injury & Employment Law
503-665-4234
The above is not legal advice. I cannot give you sound advice without knowing more information. It is intended to raise some issues for you to discuss with your own lawyer.
