S.C. Supreme Court Enforces Broadly Worded Arbitration Provision in Builder’s WarrantyNovember 18, 2016
The Supreme Court of South Carolina recently made it clear that if a home warranty includes an arbitration provision, then all claims may be subject to arbitration, not just the claims listed in and covered by the warranty itself. Parsons v. John Wieland Homes, Op. No. 27655 (S.C. Sup. Ct. filed Aug. 17, 2016). In so ruling, the South Carolina Supreme Court reversed a Court of Appeals’ decision upholding a circuit court’s finding that because the arbitration clause was located within the builder’s warranty document, its scope was limited to the terms of the warranty and did not apply to non-warranty claims such as, in this case, the homeowners’ negligent misrepresentation claim that the land on which their home was constructed was contaminated by a hazardous substance.
The home purchase agreement in this case expressly stated that the written warranty on the home was incorporated by reference into the purchase contract and that the home buyer acknowledged receipt of a copy of the warranty and agreed to all of its terms, including the binding arbitration provision contained in the warranty form.
The builder’s written warranty included a mandatory binding arbitration provision which stated, in pertinent part: Any and all unresolved claims or disputes of any kind or nature between [home builder] and Homebuyer(s) arising out of or relating in any manner to any purchase agreement with [home builder] (if any), this warranty, the Home and/or property on which it is constructed, or otherwise, shall be resolved by final and binding arbitration conducted in accordance with this provision, and such resolution shall be final. The warranty’s arbitration provision went on to state in uppercase font: [BUILDER] AND HOMEBUYER(S) HEREBY ACKNOWLEDGE AND AGREE THAT THE ARBITRATION PROCEDURE SET FORTH HEREIN SHALL BE THE SOLE AND EXCLUSIVE REMEDY FOR THE RESOLUTION OF ANY AND ALL DISPUTES ARISING AFTER THE INITIAL CLOSING OF THE PURCHASE OF THE HOME BY THE INITIAL HOMEBUYER(S).
In rejecting the homeowners’ argument that, because the arbitration clause appeared only in the builder’s written warranty, it should apply only to claims made against that warranty, the South Carolina Supreme Court found that [t]he plain and unambiguous language of the arbitration clause provides that all claims, including ones based in warranty, be subject to arbitration. Accordingly, we find the Court of Appeals erred in affirming the circuit court’s finding that because the arbitration clause was located in the warranty, its scope was limited to claims covered by the warranty.
Thus, based upon the Parsons decision, home builders in South Carolina who have broadly worded arbitration clauses in their home warranties and who properly draft their purchase agreements to incorporate their warranties into those contracts may successfully compel arbitration when the need arises.