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Burch v. Second Judicial District Court of Nevada

Posted By admin On September 1, 2009 @ 9:33 am In An Introduction To The Study Of Contract Law | No
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Citation. 22 Ill.2118 Nev. 438, 49 P.3d 647 (2002)

Brief Fact Summary. Plaintiff Burch purchased a home and homebuyers warranty from Defendant
Double Diamond (note: Double Diamond, not the named defendant, is the real party of interest and will
hereafter be referred to as Defendant). When problems arose with the home, Plaintiffs brought a suit
against Defendant. However, the homebuyers warranty includes an arbitration provision.
Synopsis of Rule of Law. While the general rule is that a party is bound by their signature, where a
provision of an adhesion contract is unconscionable it will be unenforceable against the weaker party.
Facts. Plaintiff purchased a home developed and constructed by Defendant. Four months after closing,
Plaintiff received a thirty-one page warranty booklet from Defendant. At the Defendants request,
Plaintiff signed the booklet. However, Plaintiff did not read the booklet. The warranty booklet included a
provision requiring all disputes arising from the warranty to be settled through binding arbitration.
The arbitration provision was located on page six of the booklet, following five pages of provisions only
applicable to non-Nevada residents. Defendant told Plaintiff the warranty was issued automatically and
gave them greater protection. In fact, the warranty actually limited the protection available to them
under Nevada law. The provision also granted Defendant the exclusive right to decide the rules
governing the arbitration and select the arbitrator.
Plaintiff experienced problems with the home. Defendant offered to provide some, but not all, of the
remedial work requested by Plaintiff. Plaintiff filed a claim seeking damages. The trial court granted
Defendants motion to compel arbitration. In the present case, Plaintiff is seeking a writ of mandamus
to compel the trial court to vacate its order compelling arbitration.
Issue. Is the arbitration provision enforceable against Plaintiff?
Held. No. The arbitration provision was not enforceable because it was unconscionable.
An adhesion contract is a standardized contract form offered to consumers . . . on a take it or leave it
basis, without affording the consumer a realistic opportunity to bargain. The weaker party in an
adhesion contract has to choice as to the terms of the contract. In the present case, the warranty
consisted of pre-printed, standardized forms and Plaintiff was given no opportunity to negotiate the
terms of the warranty. Therefore, the Court characterizes the warranty as an adhesion contract.
An adhesion contract will be enforced where plain and clear notification of the terms and an under
standing consent are present and the contract falls within the reasonable expectations of the weaker .
. . party. However, where the contract or a clause of a contract is unconscionable, it will be
unenforceable. For a court to refuse to enforce a contract or clause based on unconscionability there
must generally be both procedural and substantive unconscionability.
In determining whether the arbitration provision was procedurally unconscionable, the court considered
several facts. The Court determined that because Plaintiff did not have an opportunity to read or
negotiate the provisions, the arbitration provision was located on the sixth page of the agreement, and
was presented to Plaintiff as an automatic granting of extra protection for their home; Plaintiff did not
have a meaningful opportunity to agree to the terms of the warranty. Under these facts, the Court
found the procedural unconscionability to be great.
In determining that the arbitration provision was also substantively unconscionable, the Court
considered the fact that Defendant had the right to both decide the rules governing the arbitration and
select the arbitrator. Because the Court determined that the arbitration provision was both procedural
and substantive unconscionability, it found that the provision was unenforceable.
Discussion. In the present case, the adhesion contract included an arbitration provision. Because the
Court determined that the provision was both procedurally and substantively unconscionable, the
arbitration provision was unenforceable against Plai

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