Enforceability Status
Mandatory arbitration clauses in Oregon new construction contracts are likely enforceable. Oregon has adopted the Oregon Uniform Arbitration Act (ORS sections 36.600-36.740) and courts generally uphold arbitration agreements consistent with the Federal Arbitration Act. Oregon's construction defect notice statute (ORS 701.560 et seq.) operates alongside contractual arbitration provisions.
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 Oregon engage in interstate commerce, bringing their contracts within the FAA's scope. The FAA preempts state laws that would single out arbitration agreements for disfavored treatment.
Oregon's Uniform Arbitration Act, codified at ORS sections 36.600-36.740, 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. Oregon courts have applied this framework to uphold arbitration agreements in various contexts.
Oregon has a statutory framework for construction defect claims. ORS 701.560 et seq. establishes notice requirements for residential construction defect claims. Homeowners must provide written notice to the contractor and allow an opportunity to inspect and offer to repair before filing suit. This statutory process operates alongside contractual arbitration and may need to be satisfied before initiating arbitration proceedings.
Oregon courts have recognized unconscionability as a defense to arbitration enforcement. The Oregon Supreme Court has applied both procedural and substantive unconscionability analysis to arbitration provisions. However, consistent with FAA preemption, Oregon courts cannot invalidate arbitration clauses on grounds that apply uniquely to arbitration agreements.
Relevant Oregon Law
Establishes a national policy favoring arbitration and preempts conflicting state laws.
Provides the statutory framework for enforcement of arbitration agreements in Oregon.
Establishes pre-litigation notice and opportunity to repair requirements for residential construction defect claims.
Builders in Oregon Using This Clause
What Oregon Buyers Should Know
- Comply with Statutory Notice Requirements Oregon law requires written notice to the builder and an opportunity to inspect and offer repairs before pursuing construction defect claims. These requirements may need to be satisfied before initiating arbitration.
- Review the Arbitration Clause Terms Examine the scope of disputes covered, the designated provider, fee allocation, and any limitations on remedies or discovery. The contract terms shape how disputes will be resolved.
- Assess the Clause for Unconscionable Terms Oregon courts will examine arbitration provisions for unconscionability. Terms that are significantly one-sided or impose excessive costs on the buyer may be subject to challenge.
- Maintain Thorough Documentation Document all construction defects, repair requests, and communications with the builder. Arbitration discovery is typically more limited than court proceedings, making pre-existing records critical.