Friday, April 06, 2007

The Arbitration Clause and the Contractor

In Massachusetts, the homeowner has a presumptive right to pursue his or her claim through the Home Improvement Contractor Arbitration Program. However, if the contractor wants to go through the arbitration program, he must insert a clause in his contract that states that he is entitled to do so. The state of Massachusetts has a model home improvement contract on its website, and there is a sample clause that most contractors insert in their contracts. It states as follows:

The Contractor and Homeowner hereby mutually agree in advance that in the event the Contractor has a dispute concerning the contract, the Contractor may submit such dispute to a private arbitration service, which has been approved by the Secretary of the Office of Consumer Affairs and Business Regulations. The consumer shall be required to submit to such arbitration as provided in M.G.L. c. 142A.

Most contractors think that this clause would require the homeowner to go through arbitration if they have a dispute. I recently had a case however, where the homeowner filed suit, and I filed a motion to compel arbitration. The judge did not agree with my argument, and said that the clause only applies where the contractor initiates arbitration, and it does not prevent the homeowner from filing suit.

So contractors need to consider re-writing their contracts if they want to require homeowners to proceed to arbitration in the event of a dispute.


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