Enforceability Status
Mandatory arbitration clauses in Illinois new construction contracts are likely enforceable. Illinois has adopted the Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq.) and the Revised Uniform Arbitration Act (710 ILCS 15/1 et seq.), both of which support the enforcement of arbitration agreements. The Federal Arbitration Act reinforces this framework for contracts involving interstate commerce.
Legal Analysis
The Federal Arbitration Act (FAA), 9 U.S.C. sections 1-16, applies to arbitration agreements in contracts involving interstate commerce. National homebuilders operating in Illinois engage in interstate commerce, placing their contracts within the FAA's scope. The FAA establishes a presumption of enforceability for arbitration clauses.
Illinois has two arbitration statutes: the original Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq.) and the Revised Uniform Arbitration Act (710 ILCS 15/1 et seq.), adopted in 2013. Both statutes provide that written agreements to arbitrate are valid, enforceable, and irrevocable except upon grounds that exist for the revocation of any contract. The RUAA applies to agreements made after January 1, 2013.
Illinois does not have a specific construction defect statute with pre-litigation notice and cure requirements. Construction defect claims are governed by common law principles, including breach of contract, negligence, and implied warranty. The Illinois Supreme Court has recognized an implied warranty of habitability for new home construction, and arbitration clauses may govern how claims under these theories are pursued.
Illinois courts have addressed unconscionability in the arbitration context. In Kinkel v. Cingular Wireless LLC (2006), the Illinois Supreme Court addressed class action waivers in arbitration agreements. While Illinois courts have shown some willingness to scrutinize consumer arbitration provisions, the FAA preemption established in AT&T Mobility v. Concepcion limits the scope of these challenges for clauses in contracts involving interstate commerce.
Relevant Illinois Law
Establishes a national policy favoring arbitration and preempts conflicting state laws.
Provides the modern statutory framework for enforcement of arbitration agreements in Illinois for agreements made after January 1, 2013.
Provides the original statutory framework for arbitration, applicable to agreements predating the RUAA.
Related Cases
The Illinois Supreme Court addressed class action waivers in consumer arbitration agreements, though subsequent FAA preemption case law has limited the applicability of this decision.
Builders in Illinois Using This Clause
What Illinois Buyers Should Know
- Determine Which Arbitration Statute Applies Illinois has both an original and revised Uniform Arbitration Act. The applicable statute depends on when the arbitration agreement was executed, which may affect procedural rights.
- Review the Scope and Limitations of the Clause Examine which disputes are covered and whether the clause limits remedies, discovery, or the types of damages available. Understand how the clause interacts with any warranty provisions.
- Evaluate the Fee Structure Review how arbitration costs are allocated between the buyer and builder. Illinois courts may examine whether fee provisions effectively prevent buyers from pursuing legitimate claims.
- Document Defects and Communications Thoroughly Maintain detailed records of all construction issues, repair requests, and builder responses. Limited discovery in arbitration makes contemporaneous documentation essential.