The New Jersey Supreme Court recently held that a “consumer cannot be required to arbitrate when it cannot fairly be ascertained from the contract’s language that [he or] she knowingly assented to the provision’s terms or knew that arbitration was the exclusive forum for dispute resolution.” Kernahan v. Home Warranty Adm’r of Fla., Inc., 236 N.J. 301, 322 (2019).See, also, Atalese v. U.S. Legal Servs. Grp, 219 N.J. 430 (2014). Most recently, in Robert Becker v. Ollie Slocum & Son, Inc., Superior Court of New Jersey, Appellate Division, Docket No. A-4992-17T1, (Decided October 4, 2019), an appellate panel in an unpublished opinion found that an arbitration clause in a home construction contract was unenforceable.
Plaintiff entered into an agreement in November 2011 for the construction of a new home that would be substantially completed within fifty-two weeks. Defendants substantially completed construction of plaintiffs’ home in 2014, approximately eighteen months past the agreed-upon date of completion. After the completion of construction, plaintiff found several alleged defects in the home and filed a complaint claiming an over payment of $35,000. The trial court granted Defendants’ motion to compel arbitration, pursuant to an arbitration clause in the home construction contract. Plaintiff appealed.
While acknowledging that New Jersey public policy favors arbitration as a way to settle disputes, that public policy does not mean that every arbitration clause will be enforceable. In examining the arbitration clause in the home construction contract, the Court noted:
A valid arbitration clause “must state its purpose clearly and unambiguously.” Atalese, 219 N.J. at 435. When agreeing to arbitration, “consumers must have a basic understanding that they are giving up their right to seek relief in a judicial forum.” Ibid. Because arbitration necessarily involves a waiver of the right to bring the case to court, courts should “take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of the ramifications of that assent.” Id. at 442-43 (quoting NAACP of Camden Cty. E. v. Foule Mgmt. Corp., 421 N.J. Super. 404, 425 (App. Div. 2011)).
Op. at page 4.
Because the clause was not “…clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law” (Id.at447), the Court found that the clause was unenforceable. Relying on Roman v. Bergen Logistics, LLC, 456 NJ Super 157 (App. Div. 2018), an enforceable provision must inform a plaintiff that arbitration is the exclusive remedy for resolving claims and that plaintiff is waiving the right file a lawsuit or legal proceeding as well as waiving the right to a jury trial. The clause failed in this case because no such language was included.
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