Baker Vs Osborne Development Case Summary
Case Study: Baker v Osborne Development Corp.
LS311-01: Business Law
May 26, 2014
Case Study: Baker v Osborne Development Corp. Thomas Baker and others who purchased new homes from Osborne Development Corp. sued for multiple defects in the houses they purchased. When Osborne sold the homes, it paid for them to be in a new home warranty program administered by Home Buyers Warranty (HBW). When the company enrolled a home with HBW, Osborne paid a fee and filled out forms that stated the following: “By signing below, you acknowledge that you CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING ARBITRATION PROVISION contained therein.” HBW then issued warranty booklets to the new homeowners that stated: “Any and all claims disputes and controversies by or between the Homeowner, the Builder, the Warrant Insurer and/or HBW shall be submitted to arbitration.” …show more content…
Baker would be able to sue the builder, Osborne since The Ninth Circuit California Appeals affirmed a district court decision holding that the arbitration agreement was both procedurally and substantively unconscionable and also is not mutual and therefore makes it unenforceable under the California Law (Baker v., 2013).
The court’s power to determine enforceability of arbitration clauses in agreements is a threshold to be decided by the court unless the parties clearly and unmistakably provide otherwise. The trial court found that the arbitration agreement was not included in the terms of any contract between the homebuyers and the builder, and that there was no evidence that the arbitration agreement was a negotiable term and appeared to be a contract adhesion (Baker v., 2013). The court found substantive unconscionably because it would be very unlikely for the builder to sue the
buyer. Take for instance the NCR Corporation v Korala Associates LTD case that stated that by enforcing a valid arbitration clause that the courts must look at the entire contract to determine what goes to arbitration or what goes to court. This case had many possible arbitration situations; two of them involved Korala obtaining software owned by NCR, APTRA XFS and S4i. Since only the APTRA XFA was included in the contract, only the situation involving the APTRA XFS software was sent to arbitration by the courts. The issue with S4i software would have to be taken to court. This is also the case with Baker v Osborne Development Corp. With the ruling from the Ninth Circuit Court, HBW cannot force or require their clients to sign such a document and must allow them the opportunity to negotiate the terms. The insertion of the arbitration clause is therefore not valid and would give Thomas Baker along with the other homeowners and sue the companies for full restitution.
References
(2007-2008). NCR Corporation v Korala Associates LTD. UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT. Retrieved from http://www.ca6.uscourts.gov/opinions.pdf/08a0029p-06.pdf
Baker v Osborne development corp. (2013). Retrieved from http://www.lawyer.com/cases/14422029627313905142.html
Miller, R, & Jentz, G. (2010). Fundamentals of Business Law. (8th ed). Mason, Ohio: Cengage Learning.
LS311-01: Business Law
May 26, 2014
Case Study: Baker v Osborne Development Corp. Thomas Baker and others who purchased new homes from Osborne Development Corp. sued for multiple defects in the houses they purchased. When Osborne sold the homes, it paid for them to be in a new home warranty program administered by Home Buyers Warranty (HBW). When the company enrolled a home with HBW, Osborne paid a fee and filled out forms that stated the following: “By signing below, you acknowledge that you CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING ARBITRATION PROVISION contained therein.” HBW then issued warranty booklets to the new homeowners that stated: “Any and all claims disputes and controversies by or between the Homeowner, the Builder, the Warrant Insurer and/or HBW shall be submitted to arbitration.” …show more content…
Baker would be able to sue the builder, Osborne since The Ninth Circuit California Appeals affirmed a district court decision holding that the arbitration agreement was both procedurally and substantively unconscionable and also is not mutual and therefore makes it unenforceable under the California Law (Baker v., 2013).
The court’s power to determine enforceability of arbitration clauses in agreements is a threshold to be decided by the court unless the parties clearly and unmistakably provide otherwise. The trial court found that the arbitration agreement was not included in the terms of any contract between the homebuyers and the builder, and that there was no evidence that the arbitration agreement was a negotiable term and appeared to be a contract adhesion (Baker v., 2013). The court found substantive unconscionably because it would be very unlikely for the builder to sue the
buyer. Take for instance the NCR Corporation v Korala Associates LTD case that stated that by enforcing a valid arbitration clause that the courts must look at the entire contract to determine what goes to arbitration or what goes to court. This case had many possible arbitration situations; two of them involved Korala obtaining software owned by NCR, APTRA XFS and S4i. Since only the APTRA XFA was included in the contract, only the situation involving the APTRA XFS software was sent to arbitration by the courts. The issue with S4i software would have to be taken to court. This is also the case with Baker v Osborne Development Corp. With the ruling from the Ninth Circuit Court, HBW cannot force or require their clients to sign such a document and must allow them the opportunity to negotiate the terms. The insertion of the arbitration clause is therefore not valid and would give Thomas Baker along with the other homeowners and sue the companies for full restitution.
References
(2007-2008). NCR Corporation v Korala Associates LTD. UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT. Retrieved from http://www.ca6.uscourts.gov/opinions.pdf/08a0029p-06.pdf
Baker v Osborne development corp. (2013). Retrieved from http://www.lawyer.com/cases/14422029627313905142.html
Miller, R, & Jentz, G. (2010). Fundamentals of Business Law. (8th ed). Mason, Ohio: Cengage Learning.