{"id":900107,"date":"2022-07-05T15:27:06","date_gmt":"2022-07-05T21:27:06","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=900107"},"modified":"2022-07-05T15:27:09","modified_gmt":"2022-07-05T21:27:09","slug":"arbitration-provision-owner-contractor-contract","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/arbitration-provision-owner-contractor-contract\/","title":{"rendered":"Illinois Appellate Court Invalidates Arbitration Provision in Owner-Contractor Construction Contract"},"content":{"rendered":"\n<p>W. Matthew Bryant | <a href=\"https:\/\/www.saul.com\/blogs\/construction-industry-counselor\/illinois-appellate-court-invalidates-arbitration-provision\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Saul Ewing Arnstein &amp; Lehr<\/a><\/p>\n\n\n\n<p>A recent Illinois appellate decision warns that overbroad form <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/arbitration-agreement-in-usa\/\" target=\"_blank\" rel=\"noreferrer noopener\">arbitration agreements<\/a> in construction contracts may be unenforceable.<\/p>\n\n\n\n<p>In&nbsp;<em>Bain v. Airoom, LLC<\/em>, 2022 IL App (1st) 211001, the First District Appellate Court unanimously reversed a lower court decision by finding a contractor\u2019s form arbitration agreement unenforceable.<\/p>\n\n\n\n<p>A homeowner sued Airoom, LLC (\u201cAiroom\u201d), a home remodeling company, for allegedly overcharging the homeowner for delayed and incomplete home renovation work. Plaintiff\u2019s claims included,&nbsp;<em>inter alia<\/em>, breach of contract and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act).<\/p>\n\n\n\n<p>The primary dispute quickly shifted to the arbitration agreement stated in the parties\u2019 original contract. The agreement included the following terms:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>An \u201cAwards Provision\u201d prohibiting awards of punitive damages or attorney\u2019s fees and costs to the prevailing party;<\/li><li>A \u201cConfidentiality Provision\u201d requiring strict secrecy regarding the arbitration proceedings, unless both parties consented otherwise; and<\/li><li>A \u201cRules Provision\u201d requiring all arbitration proceedings to be governed by the Construction Industry Arbitration Rules of the American Arbitration Association (\u201cAAA\u201d).<\/li><\/ul>\n\n\n\n<p>The Appellate Court held the entire arbitration agreement was unenforceable on the grounds that in the context of this contract each of the above provisions was substantively unconscionable.<\/p>\n\n\n\n<p>The Awards Provision violated the Consumer Fraud Act by prohibiting awards of punitive damages and attorney\u2019s fees. The Confidentiality Provision gave Airoom an unfair advantage to collect knowledge from its past arbitrations while withholding such data from future plaintiffs. The Rules Provision should have incorporated a less expensive set of arbitration rules that is tailored to home renovation disputes: the AAA\u2019s Home Construction Arbitration Rules and Mediation Procedures.<\/p>\n\n\n\n<p>This outcome is consistent with Illinois case law, which states a plaintiff must establish either procedural or substantive unconscionability (not both) to deem an arbitration agreement unenforceable.<\/p>\n\n\n\n<p><em>Bain<\/em>\u00a0sends a clear message to contractors that arbitration agreements should state reasonably fair terms tailored to the particular contract. Arbitration agreements that overreach and contain even a few inequitable terms\u2014like one-sided confidentiality clauses or bars on damages\u2014may be found unenforceable. Although the contract in this case was with a consumer, the Appellate Court\u2019s analysis is not limited to consumer transactions. In other words, overreaching in any arbitration agreement may force a contractor to forfeit the agreement entirely. In light of\u00a0<em>Bain<\/em>, contractors should review their form arbitration agreements for overbroad terms and tailor them to remain effective.<\/p>\n\n\n\n<p>&#8212;&#8212;-<\/p>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>W. Matthew Bryant | Saul Ewing Arnstein &amp; Lehr A recent Illinois appellate decision warns that overbroad form arbitration agreements in construction contracts may be unenforceable. In&nbsp;Bain v. Airoom, LLC, 2022 IL App (1st) 211001, the First District Appellate Court unanimously reversed a lower court decision by finding a contractor\u2019s form arbitration agreement unenforceable. A&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/arbitration-provision-owner-contractor-contract\/\">Continue reading <span class=\"screen-reader-text\">Illinois Appellate Court Invalidates Arbitration Provision in Owner-Contractor Construction Contract<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41,9],"tags":[9895,10807,9310,224],"class_list":["post-900107","post","type-post","status-publish","format-standard","hentry","category-arbitration","category-construction-contracts","tag-advise-consult","tag-arbitration-agreement","tag-arbitration-provision","tag-construction-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Illinois Appellate Court Invalidates Arbitration Provision in Owner-Contractor Construction Contract - Advise &amp; 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