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Thursday, March 17, 2005

Cases: No consideration for arbitration clause

Louisiana_flag A manufactured-home buyer who voluntarily signed a manufacturer’s arbitration agreement in connection with a sale was not bound to arbitrate, says the Louisiana Court of Appeals in a recent decision.

The plaintiff bought the home from United Homes. It had been manufactured by Belmont Homes. The plaintiff signed three documents: (1) a bill of sale from United; (2) a delivery agreement with United; and (3) a one-page "Acknowledgment and Agreement" that provided for arbitration between plaintiff and Belmont. This last document had not previously been discussed, but had been presented at the closing. When plaintiff sued United and Belmont for rescission of the deal on various grounds, Belmont responded with an exception of prematurity—in effect, demanding arbitration.

No, said the court. The parties had already agreed on the terms of the sale before the arbitration issue was raised. The plaintiff had no obligation to sign the arbitration agreement, since he was entitled to get the home based on the other two agreements. It was therefore unsupported by consideration in the plaintiff’s deal with United. Belmont tried to argue that its warranty was consideration for the arbitration clause, but this failed, said the court, because Belmont failed to show that its warranty provided plaintiff with anything beyond what the law already required it to provide.

Abshire v. Belmont Homes, Inc., No. 04-1200, 2005 La. App. LEXIS 531 (3d Cir. March 2, 2005).

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