Enforceability Status
Mandatory arbitration clauses in North Carolina new construction contracts are likely enforceable. North Carolina has adopted the Revised Uniform Arbitration Act (N.C.G.S. Ch. 1, Art. 45C) and courts have generally upheld arbitration agreements in residential construction disputes. The Federal Arbitration Act provides additional preemptive support.
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 North Carolina engage in interstate commerce, bringing their purchase agreements within the FAA's scope. The FAA establishes a presumption of enforceability for arbitration clauses.
North Carolina adopted the Revised Uniform Arbitration Act in 2003, codified at N.C.G.S. Chapter 1, Article 45C (sections 1-569.1 to 1-569.31). This statute provides that an agreement to arbitrate is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract. The RUAA replaced the prior North Carolina Uniform Arbitration Act and modernized the state's arbitration framework.
North Carolina does not have a comprehensive construction defect statute comparable to those in some other states. Construction defect claims are generally governed by common law principles of breach of contract, negligence, and implied warranty. The absence of a statutory pre-litigation framework means that contractual arbitration provisions play a significant role in determining how construction disputes are resolved.
North Carolina courts have enforced arbitration provisions in builder contracts. In Cyclone Roofing Co. v. David M. LaFave Co. (1981), the North Carolina Court of Appeals upheld an arbitration clause in a construction context. More recent decisions have followed the general trend of enforcing arbitration agreements in consumer contracts consistent with FAA preemption principles.
Relevant North Carolina Law
Establishes a national policy favoring arbitration and preempts state laws that discriminate against arbitration agreements.
Provides that written arbitration agreements are valid, irrevocable, and enforceable, subject to generally applicable contract defenses.
North Carolina recognizes an implied warranty that new homes are constructed in a workmanlike manner and are suitable for habitation. Arbitration clauses may govern how claims under this warranty are resolved.
Related Cases
The North Carolina Court of Appeals enforced an arbitration clause in a construction contract, finding that the parties had agreed to resolve disputes through arbitration.
Builders in North Carolina Using This Clause
What North Carolina Buyers Should Know
- Review the Arbitration Clause Before Signing Examine the scope, designated provider, fee allocation, and any limitations on remedies. North Carolina does not have a specific statute governing arbitration in residential construction, so the contract terms control.
- Understand the Implied Warranty Framework North Carolina recognizes implied warranties for new construction. The arbitration clause may govern how claims under these warranties are pursued, potentially limiting the forum and procedures available.
- Assess the Impact on Discovery Rights Arbitration typically involves more limited discovery than court litigation. Consider whether you will have adequate ability to obtain documents and information from the builder during the arbitration process.
- Document Construction Issues Promptly Maintain detailed written records, photographs, and inspection reports of any construction defects. Timely documentation strengthens claims regardless of whether they are pursued in arbitration or court.