Construction Law

Arbitration Agreement Only Exempts Enumerated Issues

By Ryan McCabe

On July 15, A Michigan appellate court determined that since the parties? arbitration agreement did not specifically exempt the issue of rescission of the purchase contract, that issue is arbitrable.  Meneghel v. Mondrian Properties Weston Downs, LLC , No. 291105, Mich. App.; 2010 Mich. App. LEXIS 1376 . The Plaintiffs in this case purchased a new-construction condominium from Mondrian. The parties signed a purchase agreement, which included an ?Arbitration and Claims? clause compelling the parties to arbitrate any construction defect dispute worth more than $2,500.

The Plaintiff purchasers arranged for two inspections after construction was completed, but before closing. The inspections revealed various construction defects; thus the purchasers informed Mondrian that they wished to rescind their purchase contract. Mondrian refused to comply with this request and the Plaintiffs brought suit for rescission of the purchase agreement, breach of contract, negligent construction, violation of public policy, violation of consumer protection law, fraudulent inducement and declaratory judgment. Mondrian moved to compel arbitration, which the trial court denied. 

On appeal, the appellate panel noted that an issue is arbitrable if an arbitration provision exists, the disputed issue is arguably within the scope of the arbitration provision, and there is no express exemption of the issue from the arbitration provision.  In a word, since there was no express exemption of the issue of rescinding the contract, the parties must arbitrate. 

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Full post as published by The South Carolina Construction Law Blog on August 27, 2010 (boomark / email).