Arbitration Provision is Unenforceable When Other Sections of the Contract Discuss Litigation
The Arkansas Court of Appeals affirmed an order denying a motion to compel arbitration in Richard Harp Homes, Inc. v. Van Wyk, No. 06-1446 (9/12/07).
The Van Wyks hired Harp to build a home. The parties' contract had a lengthy arbitration provision that purported to submit all claims to arbitration. However, later provisions in the contract discussed rights of the parties in the event of a breach, which included "court costs and expenses of litigation." The Van Wyks were sued by neighbors, and they filed a cross claim against Harp. Harp moved to compel arbitration.
The trial court ruled that the mutuality of obligation in the arbitration clause was rendered illusory when the contract was read as a whole. The court of appeals agreed and commented on the contractual language discussing litigation remedies: "While this language does not specifically reserve Harp's right to litigate any or all disputes, it does render the agreement ambiguous so that the trial court can construe the agreement."
