Home Buyers Warranty and Osborne Development Corp

Arbitration

The following case revolves around a dispute in which clients bought houses from a builder, Osborne Development Corp. After the purchases, several clients found multiple defects in the houses and thus proceeded to sue Osborne Development Corp. However, during the transactions Osborne paid and signed for a new home warranty program administered by Home Buyers Warranty. The term of this program included a binding arbitration provision. Lastly, after the purchase of the warranty by Osborne, HBW then issued warrant booklets to the new homeowners that stated “Any and all claims, disputes and controversies by or between the Homeowner, the Builder, the Warranty insurer and/or HBW… shall be submitted to arbitration.”

And hence the question arises, should the homeowners be bound by the arbitration agreement or should they be able to sue Osborne in court?

Under the assumption that Home Buyers Warranty and/or Osborne Development Corp. were transparent about the fine print, which includes the arbitration agreement, to the new homeowners during the transaction; and the homeowners signed a contract acknowledging the presence of this agreement, then the homeowners must be bound to the arbitration agreement. Even though, the homeowners would be bound to arbitration through fine print, the vagueness caused by it must be disregarded as seen in the 2008 case between NCR Corp. and Korala associates where the rule used was “When faced with a broad arbitration clause, such as one covering any disputes arising out of an agreement, a court should… resolve doubts in favour of arbitration”

On the flip side, under the assumption that no notice was made to the homeowners and no contract bound them to the terms of the warranty agreement signed by Osborne, the homeowners have every right to sue Osborne in court. This is so because, by only handing out the warranty booklet

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