Tuesday, April 17, 2007, 12:33 PM

Arbitration Agreement Signed After Performance Of Oral Contract Unenforceable

In Edwards v. Taylor, filed today, the COA held an arbitration clause unenforceable where the clause was contained in a written contract signed after an oral agreement about the same subject had been performed without any mention of arbitration.

In Edwards, the plaintiffs had contracted to buy a house and hired The Home Inspector, Inc. to conduct a pre-purchase inspection. The plaintiffs and The Home Inspector orally agreed to the inspection and price. The inspection was conducted, and the parties met. At the meeting, The Home Inspector provided an inspection report, and plaintiffs paid The Home Inspector. The Home Inspector also then presented the plaintiffs with a written contract with an arbitration clause. The parties signed the contract.

Plaintiffs closed on the inspected house, which they allege had a number of defects. Plaintiffs sued The Home Inspector, who moved to compel arbitration pursuant to the written contract.

The COA upheld the trial court's denial of the motion to compel arbitration. The COA held that the inspection was performed pursuant to the oral agreement, not the later written agreement, and that the oral agreement as a matter of law could not require arbitration, citing N.C. Gen. Stat. sec. 1-567.2.

The COA also held that the trial court's written order deeming the arbitration clause unconscionable conformed to the court's oral pronouncement. The trial court's statement that the arbitration clause had never been discussed prior to the written contract "addresses the unconscionability of the contract."

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